Politics

Analysis: Why Recent Tax Overhaul Efforts Failed and This One May, Too

Republicans taking tax message on the road this week without details

House Ways and Means Chairman Dave Camp, second from right, and Senate Finance Chairman Max Baucus, third from right, speak with executives at an appliance store in Lawrence, N.J., during a stop on their 2013 tour to promote their tax overhaul effort. (Bill Clark/CQ Roll Call File Photo)

The last time Republican tax writers unveiled legislation for overhauling the tax code, it elicited this telling response from the speaker of the House: “Blah, blah, blah, blah.”

It was Feb. 26, 2014, and the House Ways and Means Committee had just unveiled a tax overhaul discussion draft, with full legislative text and both dynamic and static scores from the Congressional Budget Office.

Speaker John A. Boehner’s “blah” reaction came in response to a reporter’s question about some of the contentious elements of the plan, such as a new tax on banks with more than $500 million in assets and curbing the tax preference for carried interest.

“This is the beginning of the conversation,” Boehner said, trying to explain his unenthusiastic response without directly criticizing the proposal — although he was clearly not a fan. 

The draft bill was actually the culmination of three years of work by then-Ways and Means Chairman Dave Camp and his fellow House Republican tax writers. The GOP lawmakers had begun the effort working with Democrats, but as they started to debate details, they quickly realized a bipartisan agreement was likely out of reach.

The Camp bill, which the Michigan Republican formally introduced weeks before his pending retirement in 2014, was never marked up in committee or seriously considered as a candidate for floor action.

Now, more than three years later, Republicans are still trying to overhaul the tax code. A few things have changed, but many of the problems that led to the failure of Camp’s bill still exist. 

What’s different?

The most notable change between the current effort and the one Camp led from the start of his chairmanship in 2011 to his retirement four years later is that Republicans now also control the Senate and the White House

And House Republicans are now led by Speaker Paul D. Ryan, who served on the Ways and Means Committee during Camp’s effort and briefly chaired the panel after him. Unlike Boehner, who never showed significant interest in overhauling the tax code, simplifying the code has long been Ryan’s legislative dream — although he never spent much energy promoting Camp’s plan.

Republicans, emboldened by the prospect of unified government, started 2017 hoping to repeal and replace the 2010 health care law and rewrite the tax code, all before the August recess. 

But the recess is halfway over and neither of those bills have made it to President Donald Trump’s desk. The tax overhaul effort has not even produced legislation yet, although GOP tax writers are working on drafting it.

Many of the Republicans’ broad goals remain the same as during Camp’s time: simplify the code, cut tax rates, eliminate “special interest loopholes,” and ultimately, generate growth and create jobs.

But so do many of the pitfalls: Democrats are not on the same page; cutting tax rates cannot easily be done in a vacuum; eliminating the tax deductions and credits that lawmakers often refer to as “loopholes” will ultimately infuriate a variety of individuals and businesses that benefit from them; and Republicans struggle to agree on details.

There wasn’t a single reason Camp’s bill failed to gain traction. And if the current effort also fails, there will undoubtedly be plenty of blame to go around. But there are some lessons to be learned from the past. 

Bipartisan no more

One big takeaway Republicans have drawn from their previous efforts to overhaul the tax code is that they’re better off going it alone than relying on Democratic support.

That’s why after Trump won the presidency, they quickly identified the budget reconciliation process, which allows the Senate to pass legislation with a simple majority vote, as the best avenue for advancing a tax bill.

And since then, GOP leaders and tax writers have made little effort to include Democrats in the process.

Camp’s attempt, however, started as bipartisan partnership with then-Senate Finance Chairman Max Baucus, a Montana Democrat. 

The duo met weekly, held joint committee hearings, talked taxes over beers at Kelly’s Irish Times (a D.C. pub where some of the 1986 tax overhaul ideas were born) and even went on a mini tax tour that included stops in five states.

Camp and Baucus spent more time on messaging though, than they did agreeing on details. The Ways and Means Committee released a handful of discussion drafts detailing some aspects of their plan, and the Senate Finance Committee later followed suit. But the two panel leaders still had a lot of differences to work through. Before that could occur, Baucus was named ambassador to China by President Barack Obama

Ryan, during his brief stint as Ways and Means chairman in 2015, also tried the bipartisan approach. He and Sen. Charles E. Schumer, a tax writer who was the No. 3 Senate Democrat at the time, sought to negotiate a tax overhaul deal that would raise money for a highway funding bill.

Their talks stalled over disagreements about how much money to spend on infrastructure before they could really wade into the tax details. After a broader transportation infrastructure bill was funded through other means, Ryan became speaker and abandoned talk of a bipartisan tax overhaul. Instead, the issue become part of House Republicans’ 2016 election-year messaging document, the “Better Way” agenda.

While Republicans overwhelmingly believe unified government is their best shot at finally getting a comprehensive tax bill across the finish line, they have yet to prove this year that the House, the Senate and White House can all agree on major legislation. House Republicans have not agreed, at this point, on the contours of a budget resolution that would be needed to set up the reconciliation process for a tax overhaul.

Messaging mayhem

One lesson from the Camp effort was that messaging in generalities was not enough to meet the goal of overhauling the tax code. 

The Camp-Baucus tax tour and the beer summits they led at Kelly’s Irish Times made for great photo opportunities and drummed up a few headlines, but they didn’t move the committees any closer on key details.

It also didn’t help that the message Camp and Baucus were promoting — that a comprehensive rewrite of the tax code would result in lower taxes for individuals and businesses — was different from the corporate tax overhaul Obama was promoting at the time.

Still, the opposition to Camp’s effort was fairly muted until he released his bill. Then the floodgates opened. 

Republicans, anticipating that will happen again, are spending part of August trying to message on their tax overhaul plan before it has even been drafted.

Kevin Brady, the current Ways and Means chairman, and a few GOP panel members visited the late President Ronald Reagan’s Rancho del Cielo ranch in Santa Barbara, California, last week — a date coinciding with the big breakthrough on the 1986 tax overhaul when a conference committee agreed on the last big tax effort — to talk about the current push.

The chairman will visit UPS Worldport in Louisville, Kentucky, on Tuesday and the AT&T headquarters in Dallas on Wednesday to continue touting the benefits of a tax overhaul. Louisville is getting extra attention — Senate Majority Leader Mitch McConnell, who lives there, talked about taxes alongside Treasury Secretary Steven Mnuchin at a business event there Monday.

Ryan is also spending the week messaging on the GOP’s plans to overhaul the tax code. He held a CNN-televised town hall event in Wisconsin on Monday, where he talked about taxes but provided no new details on the still developing plan.

The speaker will tour Intel Corporation in Hillsboro, Oregon, on Wednesday and Boeing in Everett, Washington, on Thursday as part of the tax push.

Notably absent from this clearly coordinated messaging effort is Trump, although he could conceivably talk about taxes during a rally in Phoenix on Tuesday night. 

None of these events are expected to produce newfound insight into the GOP’s plans.

While having the support of large corporations like the ones Ryan and Brady are visiting this week is undoubtedly helpful to the effort, it’s keeping them and other stakeholders on board after the GOP releases a bill that may prove more difficult. 

But all the rah-rah moments Republican lawmakers and outside GOP groups are trying to create over the current recess to show support for a tax overhaul won’t stop the backlash that will inevitably come from interest groups whose coveted tax breaks get cut in the Republican bill.

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