Economy-boosting tax reform dicey
Steve Huntley July 29, 2013 4:54PM
Dan Rostenkowski (AP Photo/Stephen J. Carrera)
Updated: August 31, 2013 6:19AM
A good bit is being said in Washington about tax reform. But it’s hard to figure out whether the two sides are laying down starting positions for actual negotiations or digging hard-line partisan ditches precluding any hope of getting something done. Either way, the outlook for achieving economy-boosting tax reform seems dicey at best.
Even if the two sides are setting starting positions, they are so far apart that the prospects of finding middle ground are dim. Republicans like Sen. Marco Rubio of Florida insist that a tax code rewrite be revenue neutral, meaning it collects no more taxes than today. Democrats led by Majority Leader Harry Reid say it must raise more money for big-spending government, ideally — in his eyes — almost $1 trillion.
That’s a huge chasm, and we’re not even talking about the sensitive issue of which tax breaks, deductions, credits and loopholes would be ended in reform. How politically hot is that issue? Well, in asking all senators for their thoughts about it, Chairman Max Baucus of the Senate Finance Committee and Sen. Orrin Hatch, the ranking GOP member, promised that the senators’ recommendations would be locked up from public view until 2064, according to the Politico news site. House Ways and Means Chairman David Camp endorses this cautious approach.
Where is powerful leadership for reform? The last time it was achieved, in 1986, Republican President Ronald Reagan and Democratic Ways and Means boss Dan Rostenkowski of Illinois blazed the trail.
President Barack Obama mostly makes only vague references for fixing the code — whether it’s a case, take your pick, of him favoring redistribution of the wealth in higher taxes for the rich over pro-growth reform, or he’s worried that if he comes out strongly for it, House Republicans will be automatically against it.
On Capitol Hill, no leader for rewriting the tax code has emerged with the stature or the boldness of the irrepressible Rostenkowski — he had his committee present a fully realized detailed plan to Congress.
Furthermore, overhauling the tax system doesn’t seem to be at the top of the Capitol Hill agenda. Immigration reform remains a priority. A clash over raising the debt ceiling looms after Labor Day. Soon it will be 2014, another election year making politicians nervous about tackling major legislation.
No doubt reform is overdue for the tax system. Since the 1986 rewrite, Congress has been busy returning the code to its previous bloated mess — 4 million words long and full of corporate welfare, attempts at social and economic engineering, and generous carve outs for clout-heavy special interests.
No doubt the Internal Revenue Service needs to be reined in, given the revelations of its scandalous targeting of Tea Party and other conservative groups. A tax rewrite should deprive the IRS of the power to determine what level of political and free speech activity Americans can engage in when they exercise their First Amendment right to assemble with like-minded citizens.
No doubt the best reform would be a revenue-neutral one. But achieving the kind of overhaul that rationalizes the code with lower rates, the fewest loopholes and the broadest base will require compromise. Better for Republicans to compromise on some new revenues — but nowhere near Reid’s ludicrous demand for $1 trillion — than to bend on rates, loopholes and an expanded base.
And no doubt the odds, unfortunately, remain long that the White House and Congress can find a way to give our anemic economy the tax-code reform boost it so badly needs.