There are plenty of “tax reform is dead” articles out there, along with almost as many “here’s why tax reform can still work” arguments. Both are myopic and beside the point. Tax reform, like any major legislative effort, will happen when one party makes it a priority and the other party lacks either the votes to stop it (like what happened with healthcare reform) or the political will to do the same. The changing dynamic of the Affordable Care Act debate could be taken as a sign that Democrats’ political will is slipping, but it’s not all that clear how much that matters outside the healthcare arena.
Thirty-nine House Democrats voted for a Republican-backed bill that would undercut Obamacare by allowing insurance companies to indefinitely offer plans that do not meet the ACA’s standards. It’s the largest number of defections suffered by Nancy Pelosi’s party in years (only 34 Democrats in the House voted against the ACA in 2010, although 39 had voted against the House alternative in 2009). President Obama likely headed off larger numbers of defections by proposing administrative fixes to the canceled policy problem. Around 100 Democrats had expressed some measure of support for the House action before the president’s speech on November 14.
Over the weekend, Pelosi lauded Democrats for standing tall, despite the defection of 20 percent of her caucus. She refused to acknowledge the possibility that Democratic support would cost members in midterm elections next year, and she was dismissive of attempts to find a broader message in the high number of Democrats voting with the GOP. She called the vote “political.”
Of course, all votes are political. Democratic support for the ACA is political, particularly in the House, where the original Obamacare bill that was passed by the Senate (and forced on the House because of Scott Brown’s unexpected victory in Massachusetts) was extremely unpopular. Democrats are backing an inefficient, poorly constructed, compromise law because to abandon it now would be admitting a catastrophic mistake. Never mind that the administration charged with implementing the law has been incompetent and that the consequences of the hodgepodge legislation seem utterly surprising to everyone (on both sides of the aisle, but moderate Democrats in particular). Support for Obamacare has already cost congressional Democrats dearly, and probably will do so again next year.
Back to tax reform. Has the president’s support within his own party eroded enough to expect significant Democratic defections in the future? It’s possible, but not likely. There are many aspects of Republican tax legislation that appeal to some Democrats, including a lower corporate rate, repatriation provisions, and financial products changes (including mark-to-market treatment for derivatives). But the major divide has been on revenue. Obama wants any tax reform or budget compromise to include more taxes. Democrats have solidly backed him, despite breaking on the issue multiple times during the George W. Bush presidency.
Republicans certainly hope that congressional Democrats will break with Obama on the revenue issue as the president’s political support continues to slide. But Democratic support for higher taxes (or at least an expanded role for government) goes beyond just backing the president. It’s a major part of their raison d’être. And just as the Republican caucus has grown more conservative since 2008, its Democratic counterpart has grown more liberal. So while the 39 votes in favor of a GOP-backed bill to embarrass the president were surprising in the political climate that has dominated Washington since 2010, they probably don’t mean much for future legislative action on the budget, debt ceiling, or taxes. They just reinforce how Democratic lawmakers continue to wear Obamacare like a hair shirt.