The following editorial appeared Monday in the Washington Post:
For years, tax reform has been like Washington’s weather: Everyone talks about it, but no one does anything about it.
There is broad agreement that the Internal Revenue Code is an unfair, inefficient mess and that the solution is to lower marginal rates and apply them to a broader base of income. A simpler code, purged of its market-distorting loopholes, would foster economic equality and economic growth, both of which the United States desperately needs.
No one does anything, however, because they can’t – or at least because they say they can’t. The policy trade-offs involved are genuine, and the interest-group politics are brutal. They would be difficult to manage even if the government were not divided, as it has been since 2011, between the two parties. Does the rise of a newly elected Republican Senate change that calculus?
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We’d say that it might – and not only because President Obama, Senate Majority Leader-to-be Mitch McConnell, R-Ky., and House Speaker John A. Boehner, R-Ohio all put tax reform on their post-election lists of possible bipartisan legislation.
To be sure, Democrats want tax reform to raise money; Republicans want cuts. Still, a good deal of work has already been done on basic principles of a tax overhaul by Democrats and Republicans in both houses of Congress. This means that, if Mr. Obama and his GOP counterparts on Capitol Hill wanted to achieve tax reform in the new Congress, they would not have to start from scratch – and that the partisan gap is hardly unbridgeable.
Mr. Obama himself has long advocated reform of the country’s uncompetitive corporate tax system, with its highest-in-the-industrial-world 35 percent top rate. His proposed top rate, 28 percent, is not far from the 25 percent House Ways and Means Chairman Dave Camp, R-Mich., targeted in the comprehensive plan he laid out this year.
Mr. Obama and Mr. Camp had very different ideas for taxing the foreign earnings of U.S. multinationals, but both proposed that certain initial revenues from reform could be dedicated to infrastructure investments.
Meanwhile, the Senate Finance Committee under its former chairman, Max Baucus, D-Mont., produced a series of white papers on corporate reform before he became ambassador to China; those documents reflected months of brainstorming by his committee. Mr. Baucus’ replacement, Sen. Ron Wyden, D-Ore., is co-author of a plan with Sen. Dan Coats, R-Ind., that would set a flat corporate rate of 24 percent, as well as a three-rate structure for individuals (15 percent, 25 percent and 35 percent), which is similar in many respects to Mr. Camp’s proposal.
True, Mr. Camp, Mr. Baucus and Mr. Wyden are now all former chairmen. Still, the legislators who now follow them – the likely candidates are Paul Ryan, R-Wis., in the House and Orrin G. Hatch, R-Utah, in the Senate – are seasoned lawmakers and reform proponents.
With a strong push from Mr. Obama, early in the new Congress, they might just be willing to finish the job their predecessors started.