Tax Analysts Blog

Would a Republican Senate Improve the Chances for Tax Reform?

Posted on Mar 17, 2014

It’s the season for tax reform. Besides House Ways and Means Chair Dave Camp, both Senate Finance Committee member Rob Portman of Ohio and President Obama have unveiled their own plans to overhaul the tax code. Portman’s is very light on details, and Obama’s is still another budget proposal that would change international taxation rules and raise revenue, but there’s no doubt that Washington is now filled with tax ideas. But the political situation makes it unlikely that any major legislation will progress soon. Could that change after the elections in November?

There is no doubt that a Republican Senate would change the political dynamic on Capitol Hill. Even if Senate Finance Committee Chair Ron Wyden has been willing to work with the GOP in the past to draft tax reform legislation (his plan has been coauthored by former Sen. Judd Gregg and current Sen. Daniel Coats), having Orrin Hatch at the head of the Finance Committee would be much better for those who want tax reform to have a conservative bent. Even more importantly, replacing Harry Reid as majority leader would give Republicans control over the legislative docket. Reid has been extremely reluctant to allow the minority even the opportunity to amend existing legislation, much less vote on House-passed bills that aren’t to progressive Democrats’ liking.

Would a Republican-controlled Congress emphasize tax reform? That’s an open question. Camp probably won’t be Ways and Means chair next year because of GOP term limits. House Budget Committee Chair Paul Ryan is expected to take over, and he has different priorities. Hatch has never been known as a tax guru. So in terms of committee leadership, it’s tough to argue that 2015 will be better than 2011-2014. Republicans, however, are more committed to tax reform than Democrats. In fact, congressional Democrats are probably the least interested in tax reform of any major bloc in the capital. Reid isn’t interested in pushing for it, or even providing support for a Democratic senator who is. There’s no political gain in it for him or his caucus. Democrats want more revenue, aren’t united about how to fix the corporate tax system (few of them have even publicly supported Obama’s corporate tax reform), and have no interest in supporting major cuts or changes to popular individual tax expenditures like the home mortgage interest deduction or state and local tax deductions (which primarily benefit blue states). That’s not really a legislative program they can emphasize to voters.

A Republican Senate would be almost guaranteed to take up a House-passed tax bill. That would mean committee markups, amendments, and votes on the Senate side that won’t happen if Democrats retain the chamber this fall. Even if Obama vetoed the legislation -- which he almost certainly would -- all of that activity helps tax reform in the long run. Camp’s discussion draft hasn’t moved the needle much in terms of passing legislation, but it has laid a lot of groundwork for future efforts. Having the Senate join in, and having both chambers actually debate legislation, would be a great trial run for a major tax reform effort in 2017, when the next president takes office.

Republican chances for retaking the Senate have improved. They have two almost guaranteed pickups in West Virginia and South Dakota. Democrats will also face tough battles to hold on to Montana, Louisiana, Alaska, Arkansas, and North Carolina. And Scott Brown might end up putting New Hampshire in play. For their part, Democrats only have a slight chance for gains in Kentucky and Georgia (a real long shot, even with Sam Nunn’s daughter in the race). It’s probably at least an even proposition that the Senate flips in 2015.

And that would be good for tax reform proponents, even those who don’t support GOP policies or want to see Republicans in office. Senate Democrats aren’t interested. And they aren’t going to work with a Republican House at all. Tax reform takes a lot of legislative groundwork, and right now at least, the GOP is the only party with any real interest in doing it.

Read Comments (5)

edmund dantesMar 17, 2014

Meaningful tax reform, along the lines of the 1986 Act, would provide a
tremendous boost to economic growth, just as the '86 Act did. All the tax
considerations that are being imposed upon business decision-making are
profoundly counterproductive, and at the end of the day they don't even produce
any revenue.

Economic growth is not a priority for Senate Democrats or Obama, it never has
been, because significant economic growth is incompatible with their
environmental agenda. They have acted accordingly, which is why tax reform
would we a negative for them.

christopher berginMar 17, 2014

Tax reform is against the Democrats' party agenda? Sad if true.

Jeremy ScottMar 17, 2014


Edmund: Thanks for writing. I don't really agree that economic growth is
against the Democrats' agenda. And I don't think the president or his party's
environmental concerns really hinder tax reform. A carbon tax, cap-and-trade,
or just revamping alternative energy credits (and not just scrapping them, like
Camp) could all be part of legislation and that bill still be considered tax

Chris: Against their agenda is too strong, but I don't think Democrats see any
political gain in pushing tax reform right now. They don't really believe that
our rates are too high and they aren't as interested in major tax expenditure
reform as Camp or Baucus. Congressional Democrats have never even been strong
supporters of the president's tax reform agenda, declining to endorse almost
all of his budget proposals and outright opposing some (such as the cap on
itemized deductions). The GOP's version of tax reform might not be to
everyone's taste, but it is the party most interested in the issue right now.

edmund dantesMar 18, 2014

"I don't really agree that economic growth is against the Democrats' agenda. And I don't think the president or his party's
environmental concerns really hinder tax reform. "

Really? How do you explain the keystone pipeline delay and decision? Or the new opposition from the radical enviros to expanding LNG exports? Even though natural gas has already substantially reduced the country's carbon footprint by replacing coal?

Reducing economic growth is their unstated agenda. How do you explain an "expansion" so weak that everyone except stock investors believes that the recession hasn't ended? I believe that it was the Instapundit who observed that politicians know which policies promote growth, and when they don't adopt them it's because they have a different agenda.

Democrats love to talk about growth and jobs, but what have they done? There are a host of actions taken by this administration that have retarded
growth--it can't be just coincidence. Greens complained for years that 3% growth was too high--now we are enjoying 2% growth instead, with no sign of improvement.

Bruce NelsonMar 21, 2014

If I recall, the Republicans controlled both Houses of Congress and the
Presidency from 2002 through 2006 and nary a thing was done with respect to tax
reform. Call me cynical but I don't see any reason to think things would be

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