We may start hearing a lot more about tax reform soon. House Republicans say that tax reform is their top priority; once they have a bill (okay, if they have a bill, but they say they will) it will be H.R. 1.
And yet: Odds are that their aversion to compromise means that tax reform will die an unnecessary death in the 113th Congress.
Here’s the deal. Both parties like the idea of getting rid of various tax exclusions and, with the money saved, lowering rates. It’s (theoretically at least) good for everyone; people can make decisions based on the real economy and not on gaming the tax code, and at the same time simplification can save everyone time while only hurting the tax preparation industry.
Tax reform is always difficult; the benefits are spread widely, while the costs are concentrated, and often absorbed by well-organized interest groups — after all, that’s how obscure exclusions wind up in the tax code in the first place.
Really, however, there’s only two major obstacles to getting a deal done during the current Congress. One is that Democrats have been insisting on more revenues; the other is that Democrats fear that any reform is going to be regressive, since many current tax exemptions disproportionately benefit the wealthy.
The thing is that this leads to an perfectly available compromise: Tax reform should be revenue-neutral but should be at least as progressive as the current code. That gives both sides a win. And there’s even a logic to it: Tax reform is hard enough, and so the less that needs to be done, the better. So don’t use tax reform to get the revenues that Democrats want, but also avoid the flattening that many Republicans want.
The problem? I strongly suspect that Republicans won’t go for it. For many of them, the whole point of tax reform is to lower the top rates; a commitment to a progressive code would make that hard, and maybe impossible. And, bottom line, compromise itself is problematic for all too many Republicans.
What it all comes down to is that a party which can’t even manage to get a farm bill passed — a historic flub — isn’t likely to get anything done unless there’s a deadline or unless party interests give Members of the House a strong incentive to get it done.
But the obvious compromise is really there, if both sides want a deal.