Don’t Bet on a Tax Code Rewrite Happening Anytime Soon
In the current congressional climate, it’s wiser to assume something won’t happen than it is to assume it will — even when it’s the chairman of an important committee proposing a sweeping policy rewrite.
That advice should prove good for assessing the meaning of this week’s biggest legislative policy revelations: the plans for revamping the federal tax code that Senate Finance Chairman Max Baucus has been gestating for years, which he has started parceling out in modest daily installments.
One of the top Democratic tax-writers on the Hill for more than a decade, the Montana Democrat has been defying initial expectations and working as hard as he’s able to marshal whatever political capital he has behind an overhaul. He still dreams of defying all the odds and realizing his biggest legislative achievement in the next year before his four decades representing Montana in Washington come to an end.
“Once we get the ball rolling, many are going to say, ‘Hey, maybe there’s something to this. Maybe there’s an opportunity there to help the country create jobs and therefore an opportunity for political benefit,'” he told reporters in beginning his big reveal Tuesday.
It’s tough to find viable reasons for believing he’ll achieve this admittedly steep uphill climb, but there are several solid reasons to be confident it won’t.
The most obvious problem for Baucus: Republicans are intensely skeptical of going anywhere near a discussion that might include changing the IRS rules in ways that (fairly or not) could be described as some sort of a “tax increase.” They fear that any of their ideas for limiting or ending tax breaks in the name of simplicity will be claimed by the Democrats as bipartisan support for raising additional revenue.
And in the Senate, but even moreso in the House, the GOP will remain intensely wary, at least until after the midterm elections. That’s one reason Dave Camp, the Michigan Republican who chairs the House Ways and Means Committee, made clear last week that the slow-walking of the tax debate on his side of the Capitol had officially begun. While he had been saying for months that his committee would produce an overhaul package by the end of this year, he served notice that the timetable was highly likely to shift into 2014.
“Right now there’s just no reason to get a headline on anything other than ‘President Flails on Obamacare,'” said Grover Norquist, a prominent conservative strategist and president of the no-higher-taxes Americans for Tax Reform.
At a meeting last week with CQ Roll Call reporters and editors, Norquist said he is counseling Republicans leaders that they won’t have any political need to press an overhaul before the elections. Instead, he said, they would do best to unveil the party’s sketch for a revenue-neutral tax simplification next spring, then run on the promise to make that plan a reality if given control of the 114th Congress.
Baucus and Camp, who hopes to be exempted from GOP term limits so he can remain at the Ways and Means helm in 2015, have traveled the country together to test-market some ideas and appear to have one of the better working relationships among the top dogs at companion Senate and House committees.
But that’s about as good as it gets for Baucus. He made many senior Democrats as well as Republicans wary long ago because of his ideological shape-shifting punctuated by long periods of indecision.
Majority Leader Harry Reid has made clear he’s only willing to be minimally polite to the lame-duck chairman before curtailing his running room.
Ron Wyden of Oregon, who would take the Finance gavel in 2015 if Democrats keep the Senate, has every incentive to throw cold water on “tax reform” talk until he gets the opportunity to shape it — which is just what Wyden did Tuesday.
And of course it’s in the self-interest of Orrin G. Hatch of Utah, who would become Finance chairman in a GOP-majority Senate, not to be overly cooperative and risk his own chance to drive the biggest tax code rewrite in three decades.
All that said, there was some thought that Baucus might be able to launch his campaign with a shot of bipartisan momentum. That’s because his initial proposals are all about revamping the corporate part of the code, and most Republicans and many businesses agree with Democrats that it’s outdated and needlessly complex.
But no Republicans stood with Baucus on Tuesday when he proposed a new system for taxing multinational businesses, designed to compel them to bring home as much as $2 trillion in profits that they have sheltered abroad. No one from the GOP was in the room Wednesday when the chairman rolled out a smorgasbord of proposals (some with clear Republican parentage) for boosting the IRS’ success at collecting the taxes already on the books. And there won’t be anyone from the other side nodding appreciatively on Thursday, when Baucus explains how he’d streamline the complex system under which companies are permitted to slowly write off their business investment costs.
The stated reason: There’s no point in turning up the volume on the tax debate unless the budget conferees give such an effort some coordinated green lights.
But that’s not going to happen. For whatever limited agreement there might be on the urgent need for corporate tax simplification, there’s no bipartisan goodwill left over for simplifying the individual’s side of the code — which would mean at least discussing the future of such politically potent deductions as those for charitable donations, employer health subsidies and mortgage interest. And there’s no consensus to do the corporate half of the overhaul without tackling the individual half as well.