Tax Reform Used to Be a Bipartisan Endeavor. What Happened?

A lot has changed in the thirty one years since the last true tax reform bill was passed through Congress. Fueled by enormous advanced in technological innovation, almost everything, and everyone, is just a few finger taps away from being delivered to you in some form. These changes have pushed, and will continue to push, our economy, as well as the global economy in unthinkable directions.

Laid across that backdrop, tax reform isn’t just a nice thing to do to keep extra dollars in the pockets of Americans, it’s a necessity to keep pace with an evolving world. And yet, over that same span of time, something else changed: The polarization of our political parties.

It’s often forgotten, but the architect of the 1986 tax reform bill was not Ronald Reagan, it was Democratic Senator, Bill Bradley. Marketplace’s Lizzie O’Leary spoke with Bradley recently about his experience in working across the aisle to pass historic tax reform:

“[I]n ’86 we had a meeting at the White House and I said “Mr. President we’re both for tax reform. You’re for tax reform because when you were an actor you paid a 90 percent marginal tax rate, and I’m for tax reform because as a professional basketball player I was a deappreciable asset.”

And the message there was there something in this for everybody. And we stayed together. Now we did have some principles. Principles are equal incomes pay equal tax. Not fair to have some people making the same income pay less because they use a loophole. Second, that those who have more should pay more. And third, that the market is a better allocator of resources than members of the Ways and Means Committee and Finance Committee.”

Democratic Ways and Means Chairman Dan Rostenkowski—one of the bill’s sponsors—also played a key performance, creating a tag-team with the Reagan administration, particularly Treasury Secretary Jim Baker and his deputy Richard Darman, to get the idea off the ground and over the finish line. Indeed, after President Reagan gave a televised speech urging Americans to support reform, Rep. Rostenkowksi gave the Democrat “response,” in which he reiterated the need for reform and asked viewers to “write your representative and your senators” and “stand up for fairness and lower taxes.”

I’m not sure what seems more foreign, the idea of bipartisanship, or Democrat support for the idea of reducing taxes. Either way, the final bill received votes from 176 House Democrats, who held a majority, and 33 Senate Democrats.

Although it’s remembered much differently, the story of the Bush tax cuts carries similar themes. Kimberley Strassel writes for The Wall Street Journal:

While the Bush tax package was hardly as sweeping as today’s reform, it contained similar provisions. It cut marginal rates across the board, even knocking nearly 5 points off the top marginal rate for the 1%. It cut capital-gains taxes and lowered the estate tax to zero in 2010, before the reductions expired. These are all cuts that House and Senate Democrats today uniformly decry as giveaways to the rich and powerful.

Yet back then, nobody doubted some Democrats would support the legislation. Republicans barely commanded a Senate majority, with just 50 Senate votes, yet the tax-cut train rolled unswervingly on. Ultimately, 12 Senate Democrats voted yes. …

Also notable were the two Senate Democrats who voted “present” and the five who skipped the vote—presumably not wanting to upset their progressive base but equally fearing retribution from nonideological tax-cut-loving Americans. In the end, only 31 Democrats voted against the cuts. In the House, 28 Democrats supported the bill, from states that included New York, California, Michigan, Minnesota, Oregon and Washington. Twenty-nine House Democrats didn’t vote.

So what has changed? Why aren’t Democrats working with Republicans to advance common goals? After all, there are plenty of policy choices in the legislation that Democrats have previously supported. Things like increasing the standard deduction, increase the child tax credit, reforming the Alternative Minimum Tax, and making the corporate tax structure more competitive. It’s also clear that if Democrats would have come to the negotiating table they could have sanded off some of the legislation’s sharper edges. But Democrats weren’t at table, indeed they were actively working to turn the entire idea of tax reform into political poison.

It’s hard to imagine Democrats behaving in a similar fashion in 1986, or even in 1991. Tax reform and tax reductions are still as important as ever. Indeed, the economic evolution of the last decade makes them feel imperative. But more important than any of those things to this crop of political-minded Democrats is hope of winning back Congress and the White House. And apparently the only way they feel they can do that is by undermining a true policy accomplishment.