My friend Jared Bernstein makes many of the right points on the Camp tax reform proposal, but let me add a few.

First, it is good to see the proposal for taxing the large banks. The logic is that these banks are benefiting from implicit government guarantees through too big to fail insurance, which the tax would in part offset. The problem is that the tax is an order of magnitude too small.

The tax is projected to raises $64 billion over a decade. By comparison, Bloomberg News estimated the size of the too big to fail subsidy at $83 billion a year. That estimate is likely too large, but even cutting it in half still implies a subsidy that is more than six times the size of Camp's tax. Most of us might think it's reasonable that our tax dollars help low income families buy food or get health care for their kids. It's a bit harder to make the case for an implicit tax to support the Wall Street fraternity parties at the St. Regis. In other words, Camp's bill would hardly mitigate the desirability of breaking up the big banks.

It is also worth noting that the financial sector as a whole is hugely under-taxed compared with other sectors, a point that has even been acknowledged by the International Monetary Fund. It recommended a tax of roughly 0.2 percent of GDP (@ $400 billion over the next decade) to redress this imbalance. The financial transactions tax proposed in a bill by Senator Tom Harkin and Representative Peter DeFazio would pretty much hit this target according to the calculations of the Joint Tax Committee. Anyhow, the point here is that Camp deserves credit for attempting to address some of the special privileges granted to the financial sector, he doesn't come close to solving it.

A second related point is that his proposal would not address one of the main sources of tax gaming that allows the Mitt Romneys of the private equity industry to get extremely rich. Specifically, it doesn't limit the deduction for interest paid by corporations. This is important to private equity because one of their standard tricks is leverage up the mid-size companies they purchases in order to increase after-tax profits. This incentive to make firms highly indebted serves no public purpose (it hugely increases the risk of bankruptcy), but it can make private equity partners enormously wealthy. Camp's plan does nothing about this distortion.

Finally, people should be aware that the proposal to end the tax deduction for state and local income taxes is a direct attack on states like New York and California which have high tax rates on their wealthy residents in order to provide a higher level of services to their citizens. These tax rates will be considerably harder to maintain politically, if they were not deductible against federal income taxes. This is a reason why many opponents of state level social spending want to end this deduction. (Those wondering why the rest of the country should subsidize services in these states might want to consider the fact that these states are still huge net payers of tax -- their tax payments exceed their receipt of revenue -- to the federal government.)