Tom Campbell is seeking the Republican nomination for the California U.S. Senate seat held by Democrat Barbara Boxer in the June 8, 2010, primary. His opponent is Carly Fiorina, best known as former CEO of Hewlett-Packard, the large electronics firm.
Campbell lost to Bruce Herschensohn in the 1992 Republican primary, 38.2% vs. 35.8%. (Herschensohn subsequently lost to Barbara Boxer by 4.9 percentage points in the general election. In comparison, George H.W. Bush lost to Bill Clinton by 13.4 percentage points due to his limited effort to win California.) In 2000, Campbell won the Republican nomination but lost by 19 percentage points to Democrat Senator Dianne Feinstein. Perhaps his third run will be a charm.
In 1992 Herschensohn ran on a fiscal platform of a flat tax and a balanced budget. (Disclosure: I served as his advisor on the flat tax, which was modeled after the Hall-Rabushka flat tax.) In exchange for eliminating such deductions as home mortgage interest and exemption for municipal bond interest, Herschensohn proposed a 20% flat tax with a large personal allowance to exempt low-income households from federal income tax.
Campbell vigorously attacked the flat tax. He said that eliminating the mortgage interest deduction would lower housing values in California’s high priced real estate market. In particular, the most expensive homes would fall the most (high income households paying the top 31% marginal tax rate enjoyed double the deduction for mortgage interest than those paying 15%, most of whom take the standard deduction). Two of my Hoover colleagues, John F. Cogan and David Brady advised and spoke for Campbell on tax policy. (A bit of Intra-Hoover rivalry and diversity of opinion.)
In retrospect, Campbell’s support of high housing prices, distorted by a large tax benefit, may have been a precursor to the housing bust of 2007-09.