Tax Analysts Blog

The Last Time Everyone Gave Up on Tax Reform, It Actually Happened

Posted on Mar 11, 2014

Tax reform is going nowhere. At least that’s what the headlines say:

  • New Tax Plan Falls Flat: White House, Congress Wary
  • No Raves for Tax Reform
  • Outlook for Tax Reform: Probability of Higher Payments for Many Indicates Strong Resistance to Any Change
  • Congress Unlikely to Toe the Line: Prospects for Tax Reform Considered Dim
  • Tax Reform Could Be Painful
  • Tax Plan Split Expected to Deepen
  • Tax Reform Opposition Grows
  • A Rocky Road to Tax Reform

It’s enough to make a grown man cry, especially if he chairs the House Ways and Means Committee.

But in fact, Rep. Dave Camp, R-Mich., has reason to cheer this depressing litany. Or maybe even to jeer it. Because these headlines greeted not his tax plan, but the 1984 release of a similarly ambitious plan from the Treasury Department. A plan that made history two years later when it became the foundation for the Tax Reform Act of 1986 – the most important tax legislation of the last 40 years.

Tax reform is always a bad bet – the smart money favors gridlock and inertia. The reaction to Camp’s plan bears this out; as far as I know, no one has given it any chance of passage, or even relevance.

Except maybe my colleague Marty Sullivan, who recently pointed out that near-term enactment is not the only measure of importance when it comes to tax reform. To use a popular metaphor, advancing the ball a yard or two can be just as important as a touchdown pass. In fact, the one usually depends on the other.

The 1980s provide a case in point. When Treasury released its 1984 tax plan, it fell flat. Lawmakers, lobbyists, and political journalists were united in their conviction that the Treasury scheme was dead in the water.

Which it was, at least for a while. But the proposal still mattered. It didn’t become law in anything like its original form, but it provided many of the most important ideas that animated the 1986 tax law.

That said, Treasury's 1984 plan had one very important advantage over Camp’s proposal -- presidential support. To return to the football metaphor, the one thing common to short-yardage running plays and long-shot Hail Mary passes is a quarterback. And tax reform in the 1980s had a good one: Ronald Reagan.

That’s not to say that Reagan was the only factor – or even the most important – in getting the tax reform ball over the line. Ultimately, the president was just one of several key players, including Dan Rostenkowski, Bob Packwood, and all those fiscal eggheads in Treasury.

But tax reform is the sort of heavy political lift that really does depend on presidential leadership. White House support is necessary, even if it's not sufficient.

Don’t take my word for it -- political observers in the 1980s made the same point. Here are a few more headlines from 1984:
  • Reagan Cool Toward Tax Plan: 'Will Need to Study' Document
  • Tax Reform Plan Seen as Dead Unless Reagan Supports It Strongly
  • Lawmakers Say Chances Depend on Reagan

Ultimately, Reagan agreed to make tax reform a priority. And his support was crucial. No lawmaker, no matter how exalted, well intentioned, or energetic, can move the ball like a president.

Which is one very important reason why 2014 is different from 1984. President Obama has no discernible interest in fundamental tax reform. So conventional wisdom is right: The Camp tax plan is going nowhere fast.

But it might still be going somewhere slow.

Read Comments (1)

amt buffMar 11, 2014

Camp's proposal far outdoes the 1986 Tax Reform in sleight of hand to hide the
true marginal tax rates. You can't sell trickery as reform.

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