By: Lee H. Hamilton
As Congress moves forward on budget negotiations, the word out of Washington is to expect nothing major: no grand bargain, just more stopgap, short-term fixes. Yet there’s one ray of hope. The House and Senate chairs of the tax-writing committees, one a Republican, the other a Democrat, are preparing a comprehensive tax reform plan. They see the budget negotiations as their opportunity to enact much-needed changes to our bloated, off-kilter tax laws. How Congress handles this debate tells us a lot about how members approach difficult issues.
That’s because this latest effort to rewrite the tax code is saddled by a deep-seated problem that spans both parties and all ideologies: political timidity. Tax avoidance is a highly sophisticated and lucrative business in this country, and politicians address it at their peril.
This became clear during the summer, when the senators leading the tax-reform charge, Democrat Max Baucus of Montana and Republican Orrin Hatch of Utah, took an extraordinary step. They guaranteed senators 50 years of anonymity for any suggested changes. In other words, here’s a public issue of enormous consequence, affecting every taxpayer in the land, and they’re afraid to talk about it in public. This allowed each senator to continue attacking the tax code mess without taking any specific positions on how to improve it.
Yet tax reform is meaningless without specifics. The tax code is stuffed with breaks both large and small, each with its own constituency — often a vocal, well-funded, well-organized one.
Politicians who call for “tax reform” without going into specifics butter their bread on both sides — they ride the public outcry against the tax code in general, while avoiding the outcry
from people hurt by the changes that tax reform would inevitably bring. After all, a “loophole” to one group is usually a “lifeline” to another. So nothing happens.
Everyone knows that tax reform will involve limiting tax breaks. It should be possible to avoid the political difficulties by capping the total without eliminating specific breaks. But even this will require political backbone. Until Congress shows us that its members possess the courage to detail publicly what’s needed, talk of tax reform will be just that: talk.
Lee Hamilton is Director of the Center on Congress at Indiana University. He was a member of the U.S. House of Representatives for 34 years.