Does Max Baucus’s retirement make tax reform easier?

April 24, 2013

The topic du jour among tax wonks in Washington is whether Max Baucus's retirement makes tax reform easier. (This is why tax wonks aren't invited to many parties*.) The retiring Montanan is chairman of the powerful Senate Finance Committee, which gives him jurisdiction over tax reform, and he no longer needs to worry about reelection, which presumably frees him up to "do the right thing" on the issue -- or does it?

Max Baucus. (Haraz N. Ghanbari — Associated Press)
Max Baucus. (Haraz N. Ghanbari — Associated Press)

Baucus's retirement cuts both ways. It releases him from certain pressures. But it exposes him to new ones. So there are two questions here. First, does his retirement make tax reform likelier? And, if so, exactly what kind of tax reform does it makes likelier? Answering them requires being a bit more systematic about Baucus's new groove.

Baucus won't face a Democratic primary challenge. There were loud rumors that Montana Gov. Brian Schweitzer was prepared to mount a primary challenge. If Schweitzer's challenge took a populist tone -- and that's probably what Montana's Democratic Party activists would want -- he could've forced Baucus to the left on taxing the wealthy and corporations, and generally made it more difficult for him to compromise with his House counterpart, Rep. Dave Camp. So Baucus is now freed from a pressure that might have made the Senate tax reform bill more populist, but tax reform in general less likely to pass.

Baucus won't face a general electorate. Democrats were worried that Baucus would fold on revenues to show Montanans he wasn't like those other Democrats -- the ones who want to raise your taxes. Those Democrats are terrible. And there's no better way to prove you're different from them than to publicly infuriate them.

The concern was Baucus would end up using tax reform to prove himself back home, but because he wouldn't get Senate Democrats on board, it would go nowhere. Freed from the need to perform a ritual act of public independence, Baucus can now bargain on behalf of Senate Democrats rather than positioning himself against them. That's probably necessary for the process to actually work.

Legacy. This is Baucus's last ride. If he gets tax reform done, he leaves office as one of the most consequential Senate Finance chairs in history. His list of accomplishments will include the Affordable Care Act, the Medicare Prescription Drug Benefit (which he played a key role in from the minority), and tax reform. But if tax reform falls apart, his tenure will end with a very public failure.

This ups the urgency of the issue considerably. If he wasn't retiring, failure would be an option. Baucus and Camp could tell themselves that their efforts were laying valuable groundwork to ensure tax reform happens in the next congress. But now, for Baucus, it's this session, or it's someone else's accomplishment. That, too, makes tax reform likelier.

Baucus will need a job. I don't pretend to know what Baucus will do next. Perhaps he wants to go teach tax policy at George Washington University. Perhaps he wants to open a hipster donut shop in Washington's cool Atlas District. But let's say, just for the sake of argument, that Baucus wants to make enough money that he can fill a room with it and, Scrooge McDuck-style, dive into it off a high board.

If Baucus wants to keep his options open to make a lot of money, he probably won't want to push a tax reform that infuriates corporate interests. And if he's got any particular interests or lobbying shops in mind, he's going to want to make sure they're taken care of in this bill. This makes tax reform likelier, too, but it's a tax reform that's particularly friendly to powerful interests.

But there's a big caveat to all this: Baucus was never the impediment to tax reform. His retirement might make a bill marginally likelier, and change the underlying dynamics slightly, but the real problem was never Baucus. It's that Democrats will only accept a tax reform bill that raises new revenues, and Republicans will only accept one without new revenues. Thus far, Baucus and Camp have chosen to "table" the revenue issue, which is a bit like a couple trying to get pregnant before they've decided whether they actually want a kid. Nothing about Baucus's retirement solves that fundamental question.

*Except for Bruce Bartlett, because he can really get down.

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