Freedom Caucus’s tax reform motto: ‘Just say no’

The case for tax reform is well-established. Economists recognize that it would make the economy more efficient and stimulate investment. American corporations, which pay the highest tax rates in the world, recognize that it would make them more competitive.

Individual taxpayers recognize the heavy burden imposed by the ever-more complex tax code and want to keep more of their money rather than handing it over to Uncle Sam.

{mosads}With so much support, why hasn’t Congress been able to reach consensus on passing tax reform legislation? There are number of reasons, beginning with the reality that every provision in the tax code has a constituency that opposes change to provisions that benefit them.

Second, Democrats and Republicans have different objectives for reform. However, since Republicans control Congress and the White House, agreeing on a tax reform package is clearly doable, except for one major stumbling block — the Freedom Caucus, a group of 30 conservative and narrowly focused GOP members of Congress. 

Under House and Senate rules, for a tax plan to pass without a filibuster — a process called reconciliation must be part of a budget resolution. That is easier said than done.

The Freedom Caucus, according to a recent Wall Street Journal opinion piece by Karl Rove, “has already slowed up the process by threatening to vote with Democrats against the GOP budget resolution unless they can see and approve, in advance, every major provision of the tax-reform bill.”

This group has demonstrated that it will only say yes to things that can’t pass and no to almost everything that can. They have either forgotten or never learned Henry Clay’s wise counsel that, “Politics is not about ideological purity, or moral self-righteousness, it’s about governing. If you cannot compromise you cannot govern.” 

In July, the Freedom Caucus tried to prevent the House Budget Committee from passing a budget resolution unless a border adjustment provision — at the time a key revenue-raising component of the House GOP’s tax reform blueprint — was excluded.  

The provision was ultimately dropped for unrelated reasons, but they’ve moved on to their next target and now, according to Rove, they are threatening to oppose the “budget resolution if tax reform includes full, immediate expensing of business investment.”

The Tax Foundation’s analysis of such a provision concluded: “Full expensing is advantageous because it generates tax revenues from a dynamic and growing economy without the distortionary effects of taxes on investment.”

Since the Freedom Caucus wants to shrink government, a worthwhile objective, it should not oppose a provision that increases efficiency and simplifies the tax code simply because it results in more government revenue. That kind of opposition defies common sense.

The Freedom Caucus threat, if carried out, means that tax reform legislation along the lines of the House leadership’s Better Way blueprint would require Democrat support, which is as likely as seeing a unicorn walking in front of the Capitol.

Trying to negotiate with the Freedom Caucus may be a mountain too high since their history suggests that accommodation just encourages them to come up with more objections. If tax reform fails, predictably, the Freedom Caucus will blame Republican leadership while denying any responsibility.

Their unwillingness to compromise gives them freedom from governing, which in the end might put them back in the minority.

Since tax reform is vital to energizing the economy, the House leadership and the president need to show the courage of their convictions, even if that means playing hardball with 30 obstructionists.

They should not get a pass on holding increased prosperity hostage. Their strategy is the antithesis of Ronald Reagan’s formula for legislative success — winning with 80 percent of what you seek is far better than losing by demanding 100 percent.

William O’Keefe is the founder and president of Solutions Consulting. He formerly served as CEO of the George C. Marshall Institute, an organization that conducted technical assessments of scientific issues with an impact on public policy.