Tax reform 2013: It can happen

Slowly, step by step, the behemoth known as tax reform could return this year, after a quarter-century, to dominate the national conversation and affect every American. In his State of the Union address, President Obama has called for “bipartisan, comprehensive tax reform,” including lowering the corporate tax rate, which is the highest in the world. House Ways and Means Committee Chairman Dave Camp (R-Mich.) and Senate Finance Committee Chairman Max Baucus (D-Mont.) are working in tandem to reform the nation’s tax code. These are early steps, but we are in the first quarter of what could become the biggest game of 2013. 

The last major reform of the tax code occurred in 1986. It was another time, and the political culture was much different. Members of Congress used paper rather than computers; shrill talk radio and one-sided cable television had little influence; and bipartisanship was not just a word. Democrats controlled the House, Republicans controlled the Senate and Ronald Reagan was president. 

{mosads}No one gave major tax reform a chance of passage. At the first mention of reforming the tax code, lobbyists stormed the Capitol like the British in 1814. On several occasions, different versions of the legislation were defeated and pronounced dead. The debate lasted almost two years. The legislation seemed to be on life support — right up until the day it passed Congress by comfortable margins and was signed into law by Reagan.

There were multiple reasons the 1986 Tax Reform Act became law. Not unlike today, the tax code was overwhelmingly viewed by Americans as unfair. It was terribly complex, and while the business community defended its own targeted tax breaks, no one could defend the tax code. The final bill was far from perfect and was rife with exceptions, but corporate and individual tax rates were dramatically lowered, tax laws were simplified and the tax base was broadened as many loopholes and unnecessary tax breaks were swept away.

Tax reform, like most major changes in national policy, triumphed for two primary reasons: the leadership of the president and the bipartisan commitment of members of Congress. The times are different in 2013, but the fundamentals remain constant. 

Reagan defined the issue for the American people and put his administration at the center of the debate. The president understood that the political opposition and the special interests were too great to leave it to Congress and watch from the sidelines. President Obama would do well to take a page from his playbook.

The administration submitted its own proposal. It was not an outline but a detailed starting point. The president insisted that the final product be revenue-neutral, which imposed discipline on the negotiations. 

By selecting Secretary of the Treasury Jim Baker to head the highly talented team that would negotiate with Congress, Reagan made it clear that his most skillful and respected political heavyweight would lead the charge. The powerful committee chairmen had an equal force to deal with on the other side of the table. 

Reagan went on national television to make a compelling case for tax reform. In doing so, he raised the stakes and sent a clear message to Congress that he was willing to bet his presidency on its success. He said, “Death and taxes may be inevitable, but unjust taxes are not. … Let’s not let this magnificent moment slip away. Tax relief is in sight. … We can do it.” 

Then-House Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.) gave the Democratic response to the president’s speech. He asked Americans to “Write Rosty” and endorse tax reform. Thousands of letters poured in. Rostenkowski and then-Senate Finance Committee Chairman Bob Packwood (R-Ore.) were master politicians. They could count votes, and they knew how to make a deal. They were determined to pass a bill.

The negotiations were intense. Members fought, debated and compromised. Some differences were more regional than partisan. Texans sided with oil and gas; Pennsylvanians stood for coal. It was difficult, but they found a way to make progress.

Most importantly, leaders in Congress and at the White House realized they were close to making history. It was not another incremental tax bill, but something much larger. This was not small ball — it was the big game. A fragile bipartisan majority of Congress wanted to be part of it. And this might be the best lesson of 1986: With strong presidential leadership and bipartisan cooperation, the growing momentum of tax reform can be truly unstoppable. 

It can happen again.

Andrews is an attorney with King & Spalding. He served in Congress from 1983-1995, and was a member of the Committee on Ways and Means.