Tax Analysts Blog

Democrats Offer Nothing Much on Tax Reform

Posted on Oct 14, 2015

The Democrats held their first debate last night, and despite some attempts by the challengers to make it interesting, it mostly was a chance for front-runner Hillary Clinton to reestablish her brand and fight off the narrative that she was a sinking ship. The media is already in love with Hillary again after a solid performance (despite some evasiveness on a few questions). There was the usual talk of income inequality from Sen. Bernie Sanders, discussion of the importance of executive experience from former Gov. Martin O'Malley, nothing much from former Sen. Jim Webb, and erratic strangeness from former Gov. Lincoln Chafee. What was missing from the debate, like the Democratic campaign in general, was an emphasis on taxes or tax reform, showing again that any hopes for an overhaul of the code rely on a Republican victory in 2016.

Taxes were discussed. Bernie, of course, wants to use them to reduce the gap between the rich and the poor, something it's not clear his plan even addresses. Chafee wants a new 45 percent bracket on higher incomes. And Hillary talked some about the numerous small tax provisions she would like to enact to accomplish extremely specific, targeted goals. But nothing said onstage Tuesday night should give any tax reform observers hope that a Democratic White House in 2017 will be any more behind a broad tax reform effort than President Obama has been.

There simply isn't a Democratic constituency for tax reform in the sense that most people understand it. Clinton, who will almost certainly be the nominee, barring a health-related withdrawal or some new development in the e-mail scandal, is pushing for the exact opposite of 1986-style tax reform. Her desire to use new tax expenditures or targeted taxes to combat the college debt crisis, rising pharmaceutical costs, and lack of profit sharing is completely at odds with efforts by former Ways and Means Chair Dave Camp or current Chair Paul Ryan to broaden the base and lower rates. Instead of simplification, Clinton, like her husband, is very much in favor of complification, although she doesn't quite put her plans in those terms.

That isn't to say that Democratic voters don't care about taxes. Many want to see a new president push for higher taxes on the wealthy. They want punitive taxes on corporations that invert. They want the tax code to stop favoring foreign income. And some might even want to see the tax code's preference for debt ended (although this is usually framed as going after risk or breaking up big banks). What they don't really care about is traditional tax reform.

Tuesday showed us that a Democratic president is almost certainly not going to make a comprehensive tax proposal the centerpiece of their first 100 days. It doesn't matter if it's Clinton or Sanders (or even O'Malley, Webb, or Chafee). Like on other issues, this is the polar opposite of a likely GOP winner. It would be a shock if a Republican president -- no matter who it is -- didn't make a tax reform plan (probably even a tax cut) a major part of the first year's agenda.

So if you're that rare voter who wants to see tax reform just for tax reform's sake, you probably shouldn't be backing any of the five candidates onstage in Las Vegas.

Read Comments (2)

travis rechOct 15, 2015

Let's be honest: the only people who really care about tax reform are beltway
insiders, wealthy taxpayers looking to lower their rates and tax
professionals.

The average American doesn't really care about complex tax policy, they don't
understand the implications of high or low corporate rates and they certainly
don't embrace the "wide base, low rates" mantra most contributors here promote,
mostly because none of them have ever heard it in the regular media.

So no, the lack of populist political will for "tax reform" isn't surprising.
Especially since we all know that "tax reform" has meant, since most of us have
been alive anyway, "lower taxes for the rich." I'm not shocked that Democrats
haven't embraced the concept, no.

AMT buffOct 19, 2015

I'm surprised that Democrats aren't interested in tax reform, because it worked
so well for them in 1986. Tax shelters were eliminated in exchange for low
rates, then the Democrats jacked the rates back up after only 5 years of low
rates. What's not to like?

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