One those short lists of issues that might theoretically get some bipartisan attention this year or next, you often see “tax reform” mentioned. That’s probably because both the White House and congressional Republicans say they support it, and also because it was a prominent item in all the “grand bargain” discussions that are rapidly retreating in the rear-view mirror. Moreover, Republicans are said to be committed to a tax reform effort in the very near future, perhaps even as a condition for going along with a debt limit increase, which will eventually be needed even though the trigger date keeps moving back as deficits decline.
But as preeminent budget wonk Stan Collender pointed out earlier this week, when you look at what would have to happen for a true 1986-style bipartisan tax initiative to succeed, the odds that needle could be threaded any time soon are extremely low, if only because Democrats wouldn’t proceed with tax reform unless it’s revenue-positive, and Republicans would reject anything that’s not revenue-neutral or even a net tax cut.
House and Senate Republicans cannot possibly agree to a tax increase before the 2016 presidential election without seriously, and probably fatally, hurting their political prospects. There may be lots of hearings, white papers, and discussions between now and then, but even a hint of an accommodation on revenues will create serious problems with the GOP base.
The deficit is expected to continue to fall both in nominal terms and as a percent of GDP between now and 2017. That will make it even harder for Republicans to justify a tax increase deal to their base.
Collender also reminds us that the last successful bipartisan tax reform effort in the 1980s, when revenue-neutrality was agreed to by all, took three full years to consummate. And that was before the advent of the 60-vote-Senate and the radicalization of the conservative movement made the kind of compromises secured in 1986 infinitely more difficult.
That makes 2019 the earliest tax reform is likely to be enacted with implementation for some, but not all of the changes, starting in 2020.
And in saying that, Stan doesn’t even take into account the high probability that the IRS “scandal” will revive the hyper-regressive “flat tax” movement on the Right, destroying any common ground with Democrats.
So tax reform is one less chimera we can worry about for the immediate future.