Tax reform in 2014 may have been a dream to begin with. The news that Senate Finance Committee Chairman Max Baucus (D-MT) is President Obama’s pick to be the new ambassador to China means it is now a dream deferred.
Baucus and his Republican counterpart in the House of Representatives, Ways and Means Committee Chairman Dave Camp (R-MI), have been promising a tax reform bill for several years but have been unable to deliver. The prospect of a newcomer taking over the Finance Committee suggests that a project as major as tax reform is going to be put on hold indefinitely.
Tax reform “was already on its deathbed” prior to the Baucus announcement, said economist Leonard Burman, director of the Tax Policy Center in Washington. “Tax reform wasn’t going to happen this [coming] year.”
Waiting in the wings, though, are two lawmakers who might be able to come together and forge an agreement, though how long that would take remains a mystery.
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Sen. Ron Wyden (D-OR) who appears to be the likeliest candidate to succeed Baucus as head of Senate Finance, has a long history of pushing tax reform and has sponsored several bills over the years in partnership with Senate Republicans such as Dan Coats of Indiana and Judd Gregg of New Hampshire.
On the House side, Camp will be term-limited out of his chairmanship after 2014, and powerful Budget Committee Chair Paul Ryan (R-WI) has said that he wants to take over. In the likely event Ryan succeeds, he, too, would come to the job with a long history of sponsoring proposals to reform the tax code.
While there are differences between them, plans sponsored by both Wyden and Ryan have called for dramatic simplification of the 72,000-page tax code. Wyden’s Bipartisan Tax Simplification and Fairness Act would cut the number of tax brackets to three, and Ryan’s Roadmap for America’s Future would cut them to two. Both would do away with the Alternative Minimum tax. Both would also simplify the corporate tax code and reduce rates, which are currently among the highest in the industrialized world.
A key point here is that Wyden and Ryan have worked together before on controversial issues. In December 2011, they introduced a joint proposal to reform Medicare, in which both moved away from previously held positions and embraced a compromise of sorts.
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Wyden agreed to get behind Ryan’s effort to introduce at least a partial voucher system to pay for Medicare, while Ryan met him half way. The plan went nowhere, in large part because other Democrats were united in opposition to any version of Ryan’s health care program. But it did indicate that both are willing to make at least some tentative compromises in the effort to strike a deal.
Ryan added further to a reputation as a dealmaker by spearheading, with Democratic Senator Patti Murray, the recent bipartisan budget agreement.
However, according to Burman at the Tax Policy Center, a full overhaul of the tax system is a massive undertaking that could make the budget deal look like a minor negotiation.
“Tax reform can’t be a Democratic issue or a Republican issue because it is too easy for the other party to skewer you,” he said. “Because in any sort of real tax reform, somebody’s taxes are going up.”
Follow Rob Garver on Twitter: @rrgarver
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