Tax Analysts Blog

Baucus, the Marketplace Fairness Act, and Tax Reform

Posted on Apr 29, 2013
By now the retirement of Max Baucus is old news. Most commentators have shifted from talking about the Montana senator’s career to discussing how his seat might flip to Republicans in the next election. The mainstream press is also reporting Baucus’s statements about his house in Montana, his denials of a rift with Democratic leadership, and his platitudes about how the lack of an active campaign will make him more effective over his last year and a half in the Senate. All that might be interesting, but the tax community is mostly concerned with whether Baucus’s retirement will hinder or help the chances of tax reform. The answer might lie in how Democrats handled the Marketplace Fairness Act.

The Marketplace Fairness Act has nothing to do with federal tax reform. It would make it easier for states to collect sales tax from online retailers (primarily Amazon and eBay). Versions of the bill have languished in Congress for years, never making significant progress. For a while, the reasons for its stay in limbo weren’t entirely clear. After all, the act had bipartisan supporters and had passed committee votes. It appears that Baucus, the Senate Finance Committee chair, was the reason the Marketplace Fairness Act could never seem to make much progress.

Baucus adamantly opposed to the bill -- so much that he refused to move it through the Finance Committee during the sitting Congress. Apparently, he was prodded to do so by Senate Majority Leader Harry Reid, D-Nev., and Democratic Whip Richard Durbin of Illinois. But Baucus ignored them. So the leadership took an almost unprecedented step: They bypassed the Finance chair and his committee. In a scathing series of letters that Durbin released last week, he and a group of bipartisan senators urged Finance to move on the Marketplace Finance Act. In the final letter, he explains to Baucus and Finance ranking minority member Orrin Hatch, R-Utah, why the committee was bypassed, saying that Finance had ample time to mark up the bill and wouldn’t even provide a timeline on when it would do so.

Baucus then threw down the gauntlet on the bill, announcing his vehement opposition to it. He claimed it would hurt small businesses and that it was being rushed through the Senate (a strange argument, considering how long the issue has been before Congress). His efforts seemed to be failing, as the Marketplace Fairness Act overwhelmingly passed two procedural votes (75 to 24 and 74 to 20). It was expected to be passed on April 26, but the opposition to it had increased and the final motion to end debate passed on a vote of only 63 to 30. The vote was delayed, although the bill might still pass easily on May 6, when the Senate returns from one of its frequent recesses.

So what does this tell us about tax reform? It confirms what Baucus denied: There is a rift between him and the Democratic leadership. Reid and Durbin would have never humiliated Baucus by pushing the bill to the floor and then not letting him manage it unless they had truly lost patience with him. Baucus’s shift to the right in the last few months (which people had assumed was positioning for the election next year) has antagonized more than just progressives. It seems his Senate colleagues are growing frustrated as well.

And that will severely hamper the chances that a major tax reform bill will make it to the Senate floor. Even if Baucus can get a bill out of the Finance Committee, it will probably rely on Republican support (possibly almost exclusively GOP votes). There is no way Reid and Durbin would let such a bill come up for a vote. So Baucus’s retirement might not be a bad thing for tax reform. But his strained relationship with Reid and Senate Democrats certainly is.

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