A lot has changed in the thirty one years since the last tax reform bill was passed through Congress. Mail went from stuffed mailboxes to electronic inboxes, cell phones went from brick sized rarities to pocket-sized computers, and social media went from water cooler talks to Facebook posts. But perhaps the biggest change is political polarization.
It’s often forgotten, but the architect of the 1986 tax reform bill was not Ronald Reagan, it was Democratic Senator, Bill Bradley. Although the Reagan administration, particularly Treasury Secretary Jim Baker and his deputy Richard Darman, played an indispensable role in seeing the idea off the ground and over the finish line, Democratic Ways and Means Chairman Dan Rostenkowski—one of the bill’s sponsors—also played a key performance.
“Some of the most liberal names in the Senate voted for it, like Ted Kennedy,” American Action Forum president Douglas Holtz-Eakin told CNBC. “You have to ask yourself, would that happen in today’s environment.”
No. No it wouldn’t.
In fact, as Politico’s Elana Schor reports, liberal activists are already working to make sure no Congressional Democrat dare work with Republicans to reform a broken tax code.
Liberal groups are vowing to fight the GOP tax bill as hard as they battled Obamacare repeal. They’re expecting Democrats to stand together against any legislation that cuts taxes for the rich, even if it also trims tax bills for others. And they’re prepared to unleash their energized grass roots on any lawmaker who doesn’t get on board.
“The goal is to defeat any attempt to cut taxes for the wealthy,” MoveOn.org Washington director Ben Wikler said in an interview. “That means any Democrat or Republican who signs on for such a proposal should expect to incur the wrath of a public that thinks the economy is already rigged in favor of the rich and shouldn’t get any worse.” . . .
“We’re not really worried about the Democratic ranks right now, because we’re in a political situation where we have [Senate Majority Leader] Mitch McConnell and the White House punching themselves out,” said CREDO Action political director Murshed Zaheed, whose group launched a pro-Obamacare billboard campaign in June targeting Manchin, Heitkamp and Donnelly.
“Of course, if we see any movement, any tangible report that Senate Democrats are having trouble holding the line on the tax reform fight, then we will engage,” Zaheed added.
There can be no doubt that our current tax structure is broken. The tax code today is more riddled with loopholes, credits and deductions than it was in 1986. Corporate rates are the highest among advanced economies. And our incentive structure was not built for a world of multi-national corporations operating in an information economy.
To be fair, there is not an easily understandable, headline-grabbing fix like President Reagan enjoyed in reducing the highest income tax rate from 70 percent to 28 percent. But that should spur a productive conversation about how to expand the gains across income classes, not put more focus on the inevitable benefits that will accrue to the wealthy (along with everyone else) from any holistic tax reform.
Republicans want to have that conversation.
“Above all, the mission of the committees is to protect American jobs and make taxes simpler, fairer, and lower for hard-working American families. We have always been in agreement that tax relief for American families should be at the heart of our plan. We also believe there should be a lower tax rate for small businesses so they can compete with larger ones, and lower rates for all American businesses so they can compete with foreign ones,” leaders from the House, Senate and White House announced in a joint statement.
But where are the Democrats? Despite lamenting the flaws in our tax code for years, and despite being presented with the best opportunity in a generation to fix them, they can’t put politics behind them in the name of doing something good. If that hard-line political stance remains in place then tax reform won’t happen for another thirty years. And how far behind will America’s economy be at that point?