Baucus Untethered by Politics Seeks Path to Tax Rewrite

Max Baucus, declaring himself “unconstrained” by electoral politics for the first time since coming to Congress in 1975, placed a 20-month clock on his efforts to push a tax-code rewrite through the U.S. Senate.

In announcing that he won’t seek a seventh term in 2014, the chairman of the Senate Finance Committee said he’ll concentrate on trying to forge a compromise on a core fiscal issue dividing Democrats and Republicans.

“There’s a lot of work yet to be done here and with no campaign, I’m energized to do it,” the Montana (BEESMT) Democrat said in a brief interview in the Capitol yesterday. “It’s liberating and exhilarating.”

In theory, Baucus’s retirement and his renewed focus could improve chances of a tax rewrite that would curb breaks and lower rates. In practice, Baucus is the same lawmaker who has often frustrated Democrats by siding with Republicans, still operating in an environment that smothers bipartisan efforts.

“When you get right down to it, even with time, it doesn’t mean you’re going to succeed,” said former Senator Kent Conrad, a North Dakota Democrat who made a similar retirement decision in 2011 and said at the time he wanted to reach what proved to be an elusive grand bargain on the federal budget. “People have to be ready.”

Baucus, 71, has been the top Democrat on the Finance Committee since 2001, giving him sway over taxation, health care and entitlement programs. In that period, he has shepherded some Democratic priorities into law while breaking frequently from his party, drawing praise from Republicans for his willingness to work with them.

Opposing Democrats

Baucus was one of the chief authors of the 2009 economic stimulus and the 2010 health-care law, priorities for Democratic President Barack Obama. He also supported Republican President George W. Bush’s tax cuts in 2001, broke with most Democrats in backing repeal of the estate tax and bucked Obama last week to vote against an expansion of background checks for gun buyers.

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He has spent part of this week on the Senate floor opposing a plan backed by Democratic leaders that would let states collect sales taxes from retailers lacking a physical presence in their borders. He recently decried as a “train wreck” the implementation of the health-care law he helped pass.

‘How He Believes’

“Max votes the way he does because that’s the way he feels, that’s how he believes,” said Senator Tom Harkin of Iowa, another Democrat stepping down after the 2014 election and one who favors a more active government role in the economy than Baucus does.

Baucus became the sixth Senate Democrat -- and the third from a state Obama lost last year -- to announce he would retire after this term. The chairmen of the Armed Services, Banking, and Commerce committees are leaving, along with Harkin, chairman of the Health, Education, Labor and Pensions panel.

In Montana, which Obama lost by 14 percentage points in 2012, former Democratic governor Brian Schweitzer is “in the catbird’s seat” for next year’s Senate race because of his popularity with independents, said David Parker, who teaches politics at Montana State University in Bozeman. Schweitzer is considering running, said a person familiar with his thinking who asked not to be identified speaking without authorization.

Baucus has been holding bipartisan meetings with Finance Committee members on taxes, and he has been talking with his House counterpart, Ways and Means Committee Chairman Dave Camp.

‘Reform Hawk’

“He was already a tax reform hawk,” Senator Rob Portman of Ohio, a Republican on the Finance Committee, said of Baucus. “It’s positive because he’ll just have more time and energy to devote to it.”

Camp, a Michigan Republican, will face his own deadline. Under party-imposed term limits, his six years as the top Republican on Ways and Means will end when the next Congress convenes in January 2015.

“You’re going to see an acceleration of putting out draft bills, option papers, concept papers and the kinds of things that have to be done for people to start assessing what tax reform could mean,” said Russ Sullivan, Finance Committee staff director under Baucus for nine years before leaving in January.

The matching timelines don’t resolve the fundamental issues that have prevented lawmakers from restructuring the tax code. The parties disagree about whether additional revenue should be raised.

Revenue Neutral

Camp and other Republicans want a revenue-neutral approach. Obama’s budget calls for $1 trillion in additional revenue over the next decade, most of which would be achieved through limits on top earners’ breaks.

Baucus has said he favors raising revenue through a tax rewrite, even as he has urged senators to set that issue aside while they work on other details.

Sullivan said he sees a way to bridge that gap. Lawmakers could agree to define some provisions as closing unintended loopholes and dedicate the revenue to deficit reduction. They would use any money raised by curtailing intentional tax breaks to reduce tax rates.

“If the ideas that are put forth catch fire with the American people, both businesses and families, it won’t matter whether it raises $300 billion” over 10 years, he said.

Lawmakers haven’t said what tax breaks for individuals or corporations would be curtailed to pay for lower rates or deficit reduction.

‘Tough Decisions’

Baucus’s retirement decision “puts him in a far easier position to make the tough decisions that are needed in tax reform if he’s not worried about his re-election,” said Kenneth Kies, a Republican tax lobbyist.

Because campaigns and major legislation are time-consuming, it’s difficult for a single lawmaker to do both.

“It’s very helpful to getting something like tax reform actually accomplished not to be distracted by a campaign,” Conrad said. To pass major legislation, he said, “You just have to be all in. You just have to eat, breathe and sleep it in order to have any chance to get it done.”

Even unconstrained, Baucus said his approach to policy won’t lean more toward Democrats or Republicans than it ever has.

“No, no, no, no,” he said. “Just get the job done, just be pragmatic and practical in the best sense of the term.”

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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