Tax reform in 90 days? Good luck

Nov 30 2016

November 30, 2016
By

Steve Mnuchin, the investor-entrepreneur whom president-elect Donald Trump has tapped to be his Secretary of Treasury, declared on the Fox Business Network today that comprehensive tax reform “is going to be something that absolutely happens within the first 90 days of this presidency.” That may the most aggressive timetable since God created the planet.

In his FBN interview, Mnuchin likened the incoming Trump administration’s proposal to the last massive tax overhaul which occurred during President Ronald Reagan’s second term. The non-partisan Tax Foundation called the 1986 Reagan reforms, one of the legislative landmarks of his presidency, “a rare example of bipartisan support for fundamentally sound tax policy.”

Maybe Mnuchin thinks that 30 years has been long enough to wait for another such rewrite of the tax code, and plenty of Americans would probably agree with him. But the Treasury Secretary designee’s timetable is likely to strike a lot of veterans and observers of the 1986 effort as wildly optimistic.

For starters, a mammoth legislative proposal like comprehensive—both individual and corporate—tax reform simply takes time to enact. The Reagan Administration alone spent more than a year developing its plan. President Reagan called for reform in his 1984 State of the Union Address. The Treasury Department delivered its first draft ten months later. But after receiving feedback to that plan, Treasury re-drafted its proposal and formally submitted it to Congress in May 1985.

Meanwhile, the Ways and Means Committee of the House of Representatives, where revenue plans traditionally originate, held its first formal public hearing on tax reform on February 27, 1985. Over the next five months, Ways and Means held another 29 days of full committee hearings culminating on July 31. Various Ways and Means subcommittees held 12 hearings on reform related issues, like job tax credits, refund delays, carryover of net operating loses, and other matters. Then Ways and Means spent 26 days in meetings marking up the legislation culminating on December 3, 1985. The committee mark-up report was completed on December 7, and Congress voted on the plan on December 11. But it failed, 202-223 (with one House Member voting “present”).

The failure to pass the measure prompted President Reagan to travel to Capitol Hill to personally lobby recalcitrant Republican lawmakers to support the legislation. On December 17, the House—which was controlled by Democrats—passed the measure by 90 votes.

And that was just the long slog to get it through the House. The Senate Finance Committee held 36 hearings starting on May 9, 1985. It took another 17 days to craft the legislation, finally passing the bill out of committee unanimously, on May 6, 1986. The full Senate passed its reform bill on June 24, by a vote of 97-3. A House-Senate Conference Committee began work on July 17 to reconcile the differences in the two chamber’s bills. On September 25 the House passed the final version of tax reform by a vote of 292-136 and the Senate followed suit on September 27, by a vote of 74-23. Reagan signed the measure into law on October 22, 1986; almost two years after his Treasury department came up with its initial draft of the legislation.

To be sure, Congress could have moved faster and the Reagan Administration could have taken less time to get its reform plan up to Capitol Hill. But “sound tax policy” takes some time to enact. It took additional thousands of hours of private meetings and deliberations among administration officials and Members of Congress and their staff to set the stage for what happened in public.

But it was more than patience that got the Reagan tax reforms enacted—it took real bipartisan cooperation and talented leadership at both ends of Pennsylvania Avenue.

Looking back (full disclosure, I was a young speechwriter for Treasury Secretary James A. Baker III at the time), the political environment was much more favorable for this kind of legislation than it is today. Reagan had won a landslide re-election victory in 1984, giving him some leverage with Congress and over the myriad of special interests in Washington who were not natural allies of tax reform. Two Democratic lawmakers, Rep. Richard A. Gephardt of Missouri and New Jersey Sen. Bill Bradley, had also begun a public campaign for reform in 1983. In 1984, Rep. Jack F. Kemp of New York and Wisconsin Sen. Robert Kasten helped build support for fundamental reform with their own tax proposal.

Shrewd lawmakers like Democratic Rep. Dan Rostenkowski of Illinois, chairman of Ways and Means, Senate Republican Majority Leader Bob Dole of Kansas, and Senate Finance Committee chairman Bob Packwood, a moderate Republican from Oregon all played vital roles in shepherding the legislation through Congress. Likewise, the deft negotiating and political skills of Treasury’s Baker—applied out of the media limelight—helped move the measure forward at a number of critical junctures. As hard as it may be for some to comprehend today, for Baker, a backroom meeting would be worth a thousand tweets.

And bipartisanship was an essential ingredient for tax reform from the get go. After Reagan addressed the nation on television promoting reform, Rostenkowski, a tough, take-no-prisoners Democratic pol from Chicago delivered televised remarks on May 28, 1985 and urged viewers to “write Rosty” to help him craft the legislation. While Rostenkowski noted that he might differ with Reagan at times, he vowed to help the president pursue tax reform. Can you imagine House Democratic Leader Nancy Pelosi following President Trump on the airwaves and pledging to support one of his central goals?

In recent years Washington has rarely been able to climb above partisan bickering to enact bipartisan legislation, let alone pass something as ambitious and sweeping as tax reform. As we’ve seen with the Affordable Care Act, when you try to enact a major reform without bipartisan support, you can inadvertently undermine its prospects for long-term success.

Mnuchin, Trump, and lawmakers on both sides of the aisle on Capitol Hill will need to summon all their talents and good will to pass tax reform that will promote long-term economic growth. That’s too important to risk by rushing things.

James A. Barnes is a senior writer for Ballotpedia and co-author of the 2016 edition of the Almanac of American Politics.