Baucus Proves Democrat Foil Bowing to Montana on Revenues

Photographer: Brendan Smialowski/Bloomberg

U.S. Senator Max Baucus, a Democrat from Montana, has survived six terms by hewing to home-state interests and taking a cautious approach to potentially divisive social and fiscal issues. Close

U.S. Senator Max Baucus, a Democrat from Montana, has survived six terms by hewing to... Read More

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Photographer: Brendan Smialowski/Bloomberg

U.S. Senator Max Baucus, a Democrat from Montana, has survived six terms by hewing to home-state interests and taking a cautious approach to potentially divisive social and fiscal issues.

Just one Senate Democrat opposed the party’s majority on the estate tax, a medical-device tax, a possible carbon tax, online sales taxes and the revenue-raising budget plan. He’s the senator in charge of tax policy: Max Baucus of Montana.

Baucus, who is up for re-election next year in a state that President Barack Obama lost by 13 percentage points in 2012, has been confounding fellow Democrats with a willingness to cooperate with Republicans on taxes. Baucus’s separation from his party’s push to raise $975 billion in taxes will make it tougher for Democrats to generate that much revenue.

The 71-year-old Baucus, who has been in the Senate for 48 percent of his life, has survived six terms by hewing to home- state interests and taking a cautious approach to potentially divisive social and fiscal issues. The non-binding budget votes last week again showed Baucus as a man apart from his caucus.

“Not the first time that that has occurred,” Jim Messina, who was Baucus’s chief of staff from 2005 to 2008, said yesterday in an interview at a Bloomberg Government luncheon in Washington. Messina is now chairman of Organizing for Action, the non-profit group organized after Obama’s re-election campaign to press his agenda.

Baucus has been the top Democrat on the Finance Committee since 2001, giving him a primacy on fiscal policy that has sometimes bothered party leaders and activists who would prefer higher taxes and a more consistent voice representing the majority of Democrats.

Carried Interest

He has called for rewriting the tax code without being specific about which companies and individuals should pay more. He has supported higher taxes on private equity managers’ carried interest and suggested changing tax rules for municipal bonds so top earners don’t receive bigger benefits than others.

In a photo of President George W. Bush signing income tax cuts into law in 2001, there’s Baucus, grinning over his shoulder at a proposal most Democrats derided.

“Republicans view him as a good partner and someone they can work with,” said Dean Zerbe, a former Republican aide on the Finance Committee. “It probably doesn’t help him in his own Democratic caucus to hear that.”

Then again, when Obama signed the health-care law in 2010, Baucus -- the bill’s author -- looked on proudly. Democrats criticized Baucus during the bill’s consideration for spending too long courting Republican votes. Still, he managed to shepherd a bill into law that satisfied a long-term Democratic goal of expanding access to health insurance.

‘Mixed Bag’

Baucus’s record is a “mixed bag,” including his votes to let the Bush tax cuts expire for top earners and to repeal the estate tax, said Steve Wamhoff, legislative director for Citizens for Tax Justice, a Washington group that favors higher taxes.

“He’s lagging behind the American people” and their continued support for higher taxes even after rates rose for top earners in January, Wamhoff said. “We need revenue right now to pay for public investment and I think we need a chairman of the tax-writing committee that’s caught up with that.”

Baucus has carved out a role as a centrist in a state where Democrats can succeed with populist messages, said David Parker, associate professor of political science at Montana State University in Bozeman.

Baucus’s positions on the Senate budget plan and related amendments demonstrate that marshaling 60 votes needed to back a $975 billion tax increase in binding legislation will be difficult if not impossible.

Democratic Votes

Democrats control 55 votes in the 100-member Senate. The budget passed 50-49 March 23, with Democrats Baucus, Mark Begich of Alaska, Kay Hagan of North Carolina and Mark Pryor of Arkansas voting no. All are up for re-election next year. Frank Lautenberg of New Jersey, who is retiring after the 2014 election, was absent.

Baucus, who has been in office longer than all except two other senators, was disappointed at the lack of middle ground between Republican budget alternatives and the Democratic leadership’s plans, said Sean Neary, a spokesman for Baucus.

“Neither the House plan nor the Senate plan offered a sensible compromise,” Neary said in an e-mail.

The senator’s votes also signal that he’ll have an eye on his 2014 re-election campaign as he works on a rewrite of the U.S. tax code and leads a committee that includes 12 other Democrats who supported the budget plan and none who opposed it.

Bipartisan Meetings

Baucus has begun a series of closed-door bipartisan meetings on rewriting the tax code. For now, the panel has set aside the contentious question of whether the changes would raise more money.

Baucus will be involved in the tax overhaul and the recent votes won’t change that, Messina said.

Republicans recognize the difficulties Baucus has in Montana and within his party, making him a barometer for the ideological middle of the Senate, said Zerbe, now a national managing director at Alliantgroup LP, a tax advisory firm.

“Republicans will view him as an honest voice of what’s possible for the Democrats, at least part of the Democratic caucus, to go along with,” he said.

Baucus will face Montana voters next year for the first time since the health law was enacted. Champ Edmunds, a Republican state representative, and Corey Stapleton, a former Republican state senator, have said they’ll run.

Prolific Fundraiser

Baucus, a prolific fundraiser, had $3.6 million in his campaign account as of the end of 2012, according to the most recent data available from the Federal Election Commission.

He has a history of winning even as his state has voted for Republicans for president. Baucus won re-election to the Senate in 1984, 1996 and 2008, all years in which the Democratic presidential candidate lost in Montana. Baucus is the only sitting U.S. senator who has won three times while his party’s presidential nominee has lost.

Republicans will try to link Baucus to the health-care law and the 2009 stimulus law, Parker said. They’ll have a better argument against the Finance Committee chairman than they did last year, when Democratic Senator Jon Tester of Montana won a second term by fewer than 4 percentage points.

On the estate tax, an issue that’s important to the state’s ranchers, Baucus supported an amendment calling for repeal without replacing the lost revenue with other taxes. On that, he was joined only by only one other Democrat, Senator Joe Manchin of West Virginia.

Montana Interests

Several of Baucus’s votes against Democratic positions were defensive, protecting home-state interests or the health-care overhaul he maneuvered through the Finance Committee in 2009.

On the medical-device tax, he was less business-friendly than most Democrats, rejecting a proposal to eliminate the 2.3 percent excise tax opposed by companies such as Zimmer Holdings Inc. (ZMH) and Boston Scientific Corp. (BSX)

The tax, expected to raise about $30 billion over the next decade, was included in the health-care law. The amendment supporting the tax’s repeal passed 79-20.

With online sales taxes, Baucus opposed a nonbinding provision that would allow states to collect taxes from out-of- state retailers. He warned of a “clear infringement on states’ rights” and a usurpation of his committee’s jurisdiction.

Sales Tax

Montana is one of five states without a sales tax, meaning that the law could impose a burden on Montana retailers without providing a benefit for the state government. The amendment was adopted 75-24, and Baucus voted no, along with five of the other eight Democrats from states without sales taxes.

Parker said Baucus will be helped by a lack of Republican challengers who can raise enough money to challenge him.

“Until you’ve got someone that can prove they can play,” Parker said, “I don’t see any sense right now that he could be defeated.”

To contact the reporter on this story: Richard Rubin in Washington at rrubin12@bloomberg.net

To contact the editor responsible for this story: Jodi Schneider at jschneider50@bloomberg.net

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