A 1986 lesson on tax reform

I want to be optimistic about tax reform in this Congress. Reducing tax rates, simplifying the tax code, and making it more fair is long overdue.

But as I watch things unfolding in Congress, I see two things that could drive the attempt at tax reform effort off a cliff once again.

{mosads}First, experience demonstrates that tax reform won’t happen unless it starts as a truly bipartisan effort in the House Ways and Means Committee. And I see little evidence that is happening. At the moment, Republican tax-writers appear to be “going it alone.”

And second, there appears to be a serious effort to pay for the reduction in tax rates by employing what is called a “border tax adjustment.” But that proposal, which is estimated to raise $1.3 trillion dollars, is exactly the type of lodestone around the neck of tax reform that can stop it in its tracks.

Reforming our tax code is so important. I hope this won’t become just another year among many when politicians always promise and never accomplish it.

The idea of tax reform isn’t really controversial. Everybody knows the tax code is too complicated, too unfair, and littered with special deals for a special few. But the details of tax reform can be very controversial.

During the last successful effort to reform the U.S. tax code in 1986, I was a member of the House Ways and Means Committee where that legislation started. It was widely celebrated as a major success. We eliminated many deductions and special deals in the tax code, used the savings to substantially lower the top tax rate to 28 percent, and also simplified the tax code.

The chairman of the House Ways and Means Committee who led that effort was a larger than life Congressman from Illinois named Dan Rostenkowski. He was a big, gruff Chicago Democrat who saw an opportunity to work with a Republican President, Ronald Reagan, who had campaigned on the issue of tax reform. He also had support from his own party with Congressman Gephardt and Senator Bradley having introduced tax reform legislation in the House and Senate.

The first day of the tax reform “markup” of the Ways and Means Committee was highly unusual. The nearly three-dozen Democrat and Republican members of the Ways and Means Committee were seated at a large round collection of tables that filled the cavernous committee room.

But, also seated at that table were republican Treasury Secretary Jim Baker and his deputy Richard Darman. It was unprecedented to have representatives of the executive branch to be sitting at the table of a legislative committee.

They were there at the invitation of Chairman Rostenkowski who was determined to demonstrate that tax reform had to be bipartisan. And it worked. That first day began a long journey to write a major tax reform bill that was eventually signed into law by President Reagan and was acknowledged as a victory for improving the tax code.

Even with bipartisan cooperation, reforming the tax code in 1986 was a heavy lift. It was accomplished with the leadership of a Republican president, a Democratic chairman of the House Ways and Means Committee and a Republican chairman of the Senate Finance Committee, all strongly supporting the bill.

The 1986 experience demonstrated for me that reforming our tax code cannot, and will not, be done unless it includes participation right from the start by both Republicans and Democrats working together on the House Ways and Means Committee.

In addition, tax reform will be difficult to accomplish without the organized opposition to kill a proposal like the border adjustment tax. That proposal is described as a remedy for issues not in the tax code, and a revenue raiser to pay for lower rates. However, I fear it will likely have the impact of blocking the tax reform effort.

An old Indian chief once said, “The success of a rain dance depends a lot of timing.” That’s true of a lot of things, and it is especially true of the ability to enact major legislation such as tax reform. The timing is right for tax reform. But it takes more than timing. It also takes bipartisanship and the right mix of meaningful reform proposals to get a tax reform bill to the president’s desk for signature.

My hope is this will be the year when both political parties can become partners in enacting comprehensive tax reform. America is waiting.

Byron Dorgan served as U.S. Senator from North Dakota from 1992 to 2011. He previously served as U.S. Representative from North Dakota and earlier was Tax Commissioner of North Dakota. He is now a senior policy advisor at law firm Arent Fox and a senior fellow at the Bipartisan Policy Center.

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