Monday, November 27, 2017

Tax reform postcards from the edge

The Republican controlled United States Congress is attempting something significant that has not happened in more than three decades. Yet it is something that almost everyone in both parties believes to be grossly overdue.

Updates to the United States tax code have not been accomplished since Ronald Reagan was President.

That long ago legislation passed a voice vote in the House of Representatives in December 1985. It then took another seven months before finally passing the Senate in June 1986. President Reagan then signed the Tax Reform Act of 1986 into law on October 22, 1986.

Over the ensuing decades, further changes to the tax code have been discussed and debated in both formal political circles as well as in the media and in academia. Many on both sides of the American political aisle have voiced their concern that tax reform was necessary. Agreeing to the specifics and getting such reform done has been much more elusive.

Charles Rangel is as liberal a Democrat as you are going to find. He served in Congress for nearly five decades before retiring earlier this year. Per Brainy Quotes, Rangel once stated "We all want a simpler code, but tax reform is about much more. It is about ensuring that everyone pays their fair share."

Those final words have usually become the rub. What makes up a "fair share?" Reaching any consensus is becoming nearly impossible now in an era where American politics are as partisan and polarized as any in history. 

That 1986 tax legislation was actually co-sponsored by a pair of Democrats, Congressman Dick Gephart and Senator Bill Bradley. While Republicans held a 53-47 advantage in the Senate, the final vote in support for tax reform was 97-3. 

When the 2017 House vote was taken on November 16, no Democrats voted for it. None. Their mantra, as it has always been, claimed that Republicans were cutting taxes for "the top 1%" of earners, while giving no or little actual relief to the middle class. 

The Speaker of the House, Republican Paul Ryan of Wisconsin, responded per Naomi Jagoda and Cristina Marcos for The Hill that "Passing this bill is the single biggest thing we can do to grow the economy, to restore opportunity and help these middle-income families who are struggling."




The fact is that on most issues, especially the big ones, votes in both the House and Senate now come down rigidly along party lines. Where there used to be a dozen or more "swing" votes to be had, legislators of either party who could be appealed to and lobbied for support, that is rarely the case today. 

There is always an obligatory appeal to the middle class by both parties. Each claims to want to bring relief to those middle income earners. Yet somehow, the two parties can never agree on any issue that will actually help the middle class.

Getting actual tax reform done now is going to come down to one party or the other gaining control of both the House and the Senate. Then they are also likely to need a President of their same party who is willing to sign the new tax proposal into law.

Right now, Republicans have just such control. The GOP holds a slim 52-48 edge in the U.S. Senate, and a tight 239-194 edge in the House of Representatives. And, of course, a Republican now sits in the Oval office for the first time in eight years.

A big election will take place in Alabama in two weeks for a Senate seat. The result of that election will either maintain the Republicans edge, or tighten it even further to a barely noticeable 51-49 advantage.

In next year's mid-term elections, Democrats will need to defend the seats of 25 of their voting members in the Senate. Republicans have eight seats to defend. All 435 voting Congress persons will also have to defend their seats.




With uncertainty always a hallmark of mid-term elections, now is the time for Republicans to get tax reform done. Having missed out on a chance to repeal and replace Obamacare, the GOP needs to begin showing that it can get major legislative initiatives accomplished.

While the Republican Congresspersons of the House have now passed their plan, the Republican Senators are now preparing to vote on their own tax reform proposal. That vote is likely to take place this week.

Senator Rand Paul of Kentucky, always a key vote in these big issues, today came out in support of the Republican tax plan readying for that Senate vote:
"This tax bill is a true test for my colleagues. I’m not getting everything I want — far from it. But I’ve been immersed in this process. I’ve fought for and received major changes for the better — and I plan to vote for this bill as it stands right now."
Assuming those Senators actually get their plan to pass a vote, we still won't have tax relief. Leaders in the House and Senate would need to get together, and hash out some compromise regarding the details of their separate proposals.

Once that happens, which would likely come in the spring, then there would be votes in both Houses on the final legislation. Should that pass both votes, then it tax relief would finally get to President Trump's desk. It is presumed that the President would sign any tax reform legislation put before him.

Chris Edwards for the Cato Institute opined back in late October that "the GOP plan would give the largest relative cuts to people in the middle. On average, middle-income earners would receive larger percentage tax cuts than higher-income earners."

One highlight of the House reform plan that has been constantly pushed is that most Americans would be able to file their income taxes on a form the size of a postcard. I'll be curious to see if that actually comes to pass. 

Politics in this country are on the edge right now. The edge of sanity, that is. Next year's mid-term elections are going to be hard-fought and bloody. Passing tax reform before those elections hit would be a welcome postcard from the edge for American tax payers.

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