July 2, 2013

There’s a flurry of discussion today about tax reform (hey, I told you we were were about to hear more on it!); Lydia DePillis has a nice summary of the key issues which will probably prevent anything from happening.

The main reason? ” ‘Reform’ means entirely different things to different people.”

Specifically, both parties appear to have essentially unrelated policy goals that they would like to achieve through tax reform. Democrats want to increase overall revenues; in fact, Democratic wonk Jared Bernstein today calls revenue-neutrality the “tax reform trap.” Republicans aren’t as specific about it, but it’s pretty clear they want a less progressive system — fewer tax brackets, and changes which are much more helpful to the wealthy than to middle class or poorer Americans.

To get anything done, both sides are going to have to give up any additional goals. For Democrats, that means waiting for revenues. And that’s not impossible; after all, taxes went up twice in the years after the 1986 tax reform passed.

And for Republicans, it may mean accepting more brackets, not fewer, in order to protect progressive taxation. Remember, there’s nothing “simplifying” about fewer tax brackets. No one calculates their tax themselves, and they won’t with anything more complex than a full flat tax that begins with the first dollar earned. Complexity in the tax code comes from exclusions and deductions, not from the basic rates.

Now, my guess is that no one actually wants tax reform very much, with the likely exception of the committee chairs in both houses of Congress, David Camp and Max Baucus. But if I’m wrong and people within Congress and outside of Congress really want it, the only way it happens is if they check their other agendas at the door.

I’ve made this point before, but the key thing to remember is that tax reform is inherently very hard. Beyond that: The truth about Washington is that for anything to happen, it has to have committed supporters and, in most cases, to avoid committed opponents.

Does tax reform have committed supporters?

Are they willing to work for tax reform as a goal in itself, leaving other goals behind for now?