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July 23, 2017

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Why tax reform in the US is doomed

Here are a dozen reasons why the tax overhaul plan that House Ways and Means Chairman Dave Camp of Michigan released recently — or, indeed, any bill labeled “tax reform” — will not pass this year:

It is an election year, and lawmakers don’t take risks in election years. The bill was crafted by a Republican, so the Democrats in the Senate will never give it a fair shot. At its heart is “dynamic scoring,” an arcane accounting practice that assumes lower taxes spur higher revenues, a notion Democrats aren’t about to accept. The economic recovery, while not robust, isn’t weak enough to prompt substantial changes in the tax code.

Wait, there’s more: Camp’s involvement in the movement to stop new IRS regulations governing social-welfare groups alienates some lawmakers and provides an excuse to spurn his tax proposal. Some Republicans won’t support Camp’s drive even if they agree with his precepts because they don’t want to be identified with a proposal that has few prospects in the Senate. Every fat-cat special interest group in Washington — watch especially for the Realtors, who don’t want to undermine the much-overrated home mortgage deduction — will mobilize against it.

Still more: Democrats are offended they weren’t consulted by Camp. They’re also miffed the Republicans were briefed before they were. The proposal doesn’t have a big-name co-sponsor. President Barack Obama and the Republicans will never agree on a major initiative. The political conditions in 2014 don’t begin to replicate the conditions in 1985-1986 that produced the last tax overhaul.

Here is one reason why the Camp proposal, or another tax overhaul, should pass this year: The United States tax code is an unredeemable mess.

Into this mess waded Camp, who had hoped the bipartisan supercommittee on budget issues might have tackled tax overhaul four years ago. He’s devoutly conservative — he once rated a “0” score from the liberal Americans for Democratic Action, a badge of honor on the right. He’s also devoutly committed to his quixotic mission.

Camp defeated his Democratic rival by a margin of nearly 2-to-1 in 2012 — far bigger than former Gov. Mitt Romney’s margin over Obama in the same district — and his winning percentage in a dozen races in his district in Central Michigan has never dipped below 61 percent and once, in 1994, soared to 73 percent.

Almost everyone on both sides of the aisle comments on how mild-mannered he is. Except on one issue: the tax code.

His reprise line is that the tax code is 10 times the size of the Bible without the good news. The proposal he unveiled would reduce the top rate from 39.6 percent to 25 percent for all but some of the top 1 percent of filers, who would be subject to a 10 percent surcharge on some income.

Of course it was declared dead on arrival by all the coroners on Capitol Hill, who are better at performing autopsies than playing midwife to successful births. And in truth, there are some things about the Camp proposal that are not to everyone’s taste — or, to change senses but not tenses, there are in the Camp plan (many) things on which all lawmakers do not see eye to eye.

Camp and some others believe his proposal would spur growth of more than $3 billion, create nearly 2 million new jobs and bring an additional $700 billion in additional revenues. Maybe it will and maybe it won’t, but Camp deserves a hail and hurrah for even bringing the matter to the table.

There was a time, four decades ago, when the tax code had grown so hoary and mossy that a man could run for president and declare in his acceptance speech at his party’s national convention that the country’s income tax system was a “disgrace to the human race” (Jimmy Carter, July 15, 1976). He didn’t prevail, and it took his successor, Ronald Reagan, more than five years (May 28, 1985) to begin his public offensive — an offensive that brought a landmark tax overhaul in 1986.

In truth, the political circumstances of 1985-1986 are far different from the circumstances in Washington in 2014.

In those years, a popular Republican president held Congress in his sway, even bringing along many Democrats to his tax and spending initiatives. Today, a Democratic president with tepid approval ratings has no sway at all with the House and minimum influence in the Senate. In those years, tax overhaul had many fathers (Democratic Sen. Bill Bradley of New Jersey and Rep. Richard Gephardt of Missouri along with Republican Sen. William Roth of Delaware and Rep. Jack Kemp of New York), and it was a bipartisan push. Today’s Camp bill lost its Democratic sponsor, former Sen. Max Baucus of Montana, sworn in 10 days ago as the new American ambassador to Beijing.

The Reagan effort was the sort of spectacle that only the Gipper could swing. His co-conspirator was Rep. Dan Rostenkowski, the gruff Chicago pol who headed the House Ways and Means Committee, and in Reagan’s nationwide address he urged Americans: “Write a letter to Washington. Just address it to Rosty, Washington, D.C.” Two days later, Treasury Secretary James Baker, no one’s idea of a Republican-in-name-only, appeared before the tax-writing committee sporting a large black-and-white “Write Rosty” button.

The following elements of 1985-1986 are missing today: The kind of goodwill that would prompt a GOP president to elevate a Democrat like Rostenkowski, who died in 2010, from Capitol powerbroker to national celebrity. A president who can make his priorities the priorities of Congress.

A chief executive who has enough self-confidence to share the limelight and the credit, along with the responsibility. A Treasury secretary with Baker’s will and acumen to steer the process. Strong Senate leaders, such as Sen. Robert J. Dole, adept in the unwritten rules of the chamber and with credibility on both sides of the aisle and on both sides of the Capitol.

This is the environment in which the notion of tax overhaul is being discussed, or being dissed: Almost 6 in 10 Americans give below-average grades to Washington, according to a poll the Marist Institute for Public Opinion conducted last month for the McClatchy newspapers. Tax overhaul may not be the public’s highest priority, but the prospects for Camp’s initiative help explain why the public demands an overhaul of the Washington political culture.

David Shribman is executive editor of the Pittsburgh Post-Gazette.

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