Baucus and Camp Promise Tax Reform No Time Soon
After months of speculation about their progress and intentions, Max Baucus and Dave Camp, the chairmen of the key congressional tax-writing committees, penned an op-ed in today's Wall Street Journal committing to tax reform. We’d be more optimistic if they had kept quiet.
For starters, it's rarely a good sign to see a piece claiming something is "very much alive." As Margaret Thatcher put it, "Being powerful is like being a lady. If you have to tell people you are, you aren't." If tax reform has a chance, that should be obvious. Completion is very far away if the public still needs to be convinced the process has a pulse.
To those who watch Washington closely, it’s clear the House Ways and Means Committee is making progress scouring the tax code for new revenue and efficiency ideas. It’s also clear that Baucus, the Senate Finance Committee chairman, wants the reform process to get underway this year, in part to fulfill a long-term legacy goal and in part so he doesn't look like a spoiler amid a tough re-election battle. So how does Congress get from conception to completion?
It probably doesn’t anytime soon. Baucus and Camp, chairman of the House Ways and Means Committee, promise a totally open process of committee hearings and markups -- complete with input from the public via social media. That’s surely a triumph for democracy: The tax code affects every citizen and business, so all should have the ability to influence the result.
But that’s not a recipe for quick legislative success -- and it may be precisely why Baucus is committed to this route. Tax rates and privileges are so critical to bottom lines of households and corporations that overhaul promises to be the most-lobbied event in history. While most of Congress is happy to pledge allegiance to the abstract idea of a more efficient tax code, reality requires picking winners and losers.
When the process takes place in the sunlight, those who wind up in a worse spot will see it coming and will try to divide and conquer their opposition. For Baucus, a Montana Democrat who was worried enough about his re-election prospects to vote against both Simpson-Bowles and this year’s tax-raising Senate budget, it might not be such a bad thing if an open process slow-walks or even puts the reform process into a coma until after he secures a new term.
The chance of success would seem greater if Baucus and Camp, a Michigan Republican, had announced they were scheming behind closed doors to craft a compromise plan -- much as the lauded bipartisan Senate Gang of Eight has been doing on immigration. Now, lobbying groups are on notice that they should begin to sharpen their swords for public-relations and congressional fights that will play out in the open. The risks inherent in a new tax code are so existential that many are willing to pour untold amounts of money into shaping it to their favor -- or blocking it if that is unsuccessful.
For a transparent tax-reform process to succeed, both committee heads need to be politically strong enough to stare down turbocharged opposition, and President Barack Obama needs to be fully committed to leading on the issue, or at least helping the tax writers stand their ground. Instead, Obama’s priorities are gun control and immigration. Baucus is facing a tough re-election fight in a red state, which will put him to the right of much of his Senate caucus. And since tax reform momentum may well need to start with strong votes in the House, many representatives will no doubt be less enthusiastic about going on record against reform’s losers if the Senate and the president are indifferent.
The biggest revelation in the op-ed is that the two tax writers have agreed to three principles for reform: maintaining progressivity in the code, making U.S. firms more competitive globally and ensuring the code continues to nurture small businesses. The problem is these principles are so basic that few in Congress would disagree.
The two could have demonstrated a better chance for reform if they had committed to moving legislation by a certain date, achieving a certain revenue threshold (whether zero or otherwise), or bringing top marginal rates for corporations and individuals to a target level. More important, they could have issued a plea to disconnect tax reform from entitlement reform, to which it is chained by grand-bargain hopes that seem perpetually to cause both to sink together.
There is nothing wrong with the tax chiefs framing the issue in advance of Obama’s Wednesday budget release or in the run-up to the April 15 filing date that has most Americans thinking about taxes this week. But their op-ed does little to build a case that tax reform is likely to get over the finish line rather than die a death by a thousand lobbyists.
Reform might have seemed more likely if they hadn’t written it at all: At least then hopes could be anchored to rumors of a secret backroom deal being quietly brokered.