Will there be any substantive comprehensive tax reform in 2013? Can there be? Our nation’s legislators are drowning in what appears to be a sea of ineptitude. While the primary leaders of tax writing committees (Sen. Max Baucus of the Senate Finance Committee and Rep. Dave Camp of the House Ways and Means Committee) have been exhausting themselves in trying to push Tax Reform forward, their legislative colleagues have largely ignored those efforts.
Both Baucus and Camp will lose their positions on their respective tax writing committees soon. Baucus because of retirement and Camp due to term limits. I believe there simply isn’t the political strength of character to bring any meaningful Tax Reform to fruition.
The tax code was last thoroughly revamped in 1986, when Republican President Ronald Reagan struck a deal to pass legislation backed by a Democratic House of Representatives and a Republican Senate. Strong politicians on both sides of the aisle stepped up and came up with a more efficient tax code.
I listened in my classroom at NYU to my professors tell of their testimony before Congress and Treasury as that 1986 tax act was being negotiated. The list of complex topics was significant and the insights offered by my professors had manifested years before I arrived at NYU. In the end, the final bill dealt with these complex topics. But, it took real political willpower to enact the Tax Reform Act of 1986 into law.
That willpower does not appear to exist today. Congress is spending most of its time with political infighting, largely separated by party lines, unable to pass even the most basic legislation. Instead, it focuses its time on passing legislation that in the end has no real chance of ever being signed into law.
The current tax code is over 70,000 pages since enacted in 1986. “Since that date, it’s built up barnacles, loopholes, deductions, credits, 15,000 changes,” Baucus said.
Max Baucus and Sen. Orrin Hatch (the ranking Republican on the Senate Finance Committee) have challenged all other senators to submit proposed changes in the name of tax reform. Few have responded. As the Senate and House members mostly remain out for summer recess, little has been done to advance the prospects of meaningful tax reform ahead of next years’ congressional elections.
“Tax Expenditures” (subsidies provided in the form of tax breaks) are the current focus — what to eliminate, what to keep? This focus has kept the process bogged down and is politically inexpedient. This is the lobbyists’ playground.
To deal with this, the idea of using a “blank slate” to achieve tax reform has been suggested. While this is probably the best approach, it is an approach which, in my opinion, will take years to accomplish. Remember, the purpose of the tax code is ultimately to raise revenue. While there are many competing arguments on how best to accomplish that goal, it still remains the absolute goal.
Politics make the process a minefield for legislators, most of whom do not have the courage to face their many constituents and explain the pain that will be felt by eliminating one tax break in favor of another. The idea of accomplishing true tax reform in the foreseeable future is admirable but not likely. The Wall Street Journal puts the odds of any meaningful reform in 2013 or 2014 at less than 50%.
