Tax Analysts Blog

Tax Reform: Coming Around the Clubhouse Turn?

Posted on Jul 1, 2013

Newspapers and other media outlets have a built-in bias to exaggerate. They know that no matter how true it may be, if a headline reads “Nothing Really Important Happened Today” their hit count and their ratings will drop. And so would their already fast-dwindling revenue. So editors and writers are always pressured to make a big deal out of nothing.

This phenomenon was on display last Thursday when “Senators propose ‘blank slate’ approach to tax reform” made the front page of the June 27 edition of the Washington Post. After years of hearings and meetings the leaders of the Senate Finance Committee--Chairman Max Baucus, age 71, Democrat from Montana and Orrin Hatch, age 79, Republican from Utah—have announced a new approach to the method by which they will interact with other senators in their deliberations on tax reform: instead of asking which tax breaks to eliminate, they will assume the hypothetical that all tax breaks are eliminated and ask senators which they should keep.

My editors constantly and correctly remind me not to use a snarky tone. But I hope they will allow an exception here. (The fact that you are reading means that I won this one.) Let’s go negative. Let’s talk about what the Senators have not done.

They have not specifically named one single tax break for elimination. They have not decided whether revenue from cutting tax breaks will be used to reduce the deficit or to reduce tax rates. They have not outlined a tax reform plan. They have not drafted tax reform legislation. They have not offered a plan for markup in committee. They have not gotten the votes for committee approval. They have not gotten the votes for full Senate approval. They have not negotiated a compromise with the House of Representatives. And they have not gotten the approval of the President.

Every one of these steps is necessary for the passage of tax reform. I personally will be extremely interested--in fact, I would be truly excited--if they made any progress on the first two. But what is far more likely is senators will continue to avoid tough decisions.

"We're now entering the home stretch. We need your input and partnership to get tax reform over the finish line,” Baucus and Hatch wrote to their colleagues. Senators, you are not out of the starting gate. You are not even out of the paddock.

All the Senators have really done is set in motion a surge of lobbying activity. Their announcement will make a lot of money for their former colleagues and staffers who are now lobbyists. (See, for example, Ezra Klein's column, "At Least 28 Former Max Baucus' Aides are Now Lobbyists.") These merchants of influence will rightly tell their clients that if they do not aggressively defend their favorite tax breaks they may be left without a chair when the music stops playing. And with the Senate leaders announcing this is the way the game will be played, they will have no choice but to pony up.

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