Tax Reform is Quietly Percolating Through Congress

Posted: May 01, 2013 12:01 AM
Tax Reform is Quietly Percolating Through Congress

WASHINGTON -- It's not premature now to say that President Obama's second-term agenda is adrift. That is, if he ever really had a well-thought-out agenda to begin with.

Little more than four months into his fifth year in office, the prospects of his legislative priorities remain murky at best, while his efforts to win support in Congress and rally the country behind his proposals have been greeted with a big political yawn.

Even some of his liberal supporters in the news media are giving him failing leadership grades on Capitol Hill and on his campaign-style efforts to build public support for his agenda at the grass-roots level.

"At this point in his presidency, Obama has pretty much tried it all. He has met privately with Republican leaders in the House, collaborated with bipartisan groups of senators and taken his case to the people," The Washington Post said in a critical front-page evaluation Monday. "This year, for the most part, none of those approaches have worked."

The president, known for his political aloofness, even among Democratic leaders on the Hill, has tried to show a little warmth with legislative leaders who can make things happen for him, as Ronald Reagan did with his second-term tax rate-cut agenda. But the Post ruefully concedes that "Obama still isn't very good at using his personal charm to achieve political success."

Let's review: His ambitious gun control proposals were shot down in the Democratic-run Senate when several members of his own party deserted him. His immigration reforms face an uncertain future in that chamber, too, and perhaps less of a chance in the GOP-controlled House. His tax-raising budget is dead.

Second-term presidencies often face difficult odds, and Obama's may be tougher than most because of his narrow re-election in the popular vote and a strategic campaign decision to avoid a salient issue that polls showed was the voters' No. 1 concern: a weak, job-scarce economy.

Reagan soared into his second term with a huge 49-state mandate and a solidly recovering economy that was growing by nearly 6 percent. He had campaigned on a tax-rate-reduction, revenue-neutral plan to scrub dozens of income tax exemptions, credits and other loopholes from the IRS code.

That plan, enacted with bipartisan support, brought in a lot of new revenue that was used in part to cut tax rates across the board and bring the top rate down to 28 percent. (The top rate under Obama for high-income taxpayers is now close to 40 percent, weakening capital investment, new business start-ups and job creation.)

If Obama were looking for a role model showing how he can reach out to both sides of the aisle, Reagan's record is the place to start. His 1986 tax reform plan was being pushed on Capitol Hill by top Democrats, including Rep. Richard Gephardt of Missouri, who went on to become House Democratic leader, and by liberal Sen. Bill Bradley of New Jersey, among others.

While Obama has shown little, if any, sincere interest in pro-growth tax reform (he certainly didn't campaign on this issue last year), it is being championed by Montana Sen. Max Baucus, the Democratic chairman of the tax-writing Senate Finance Committee.

Indeed, a Reagan-like tax reform bill may have more support among Senate Democrats than the White House realizes at this point.

Not only is Baucus working on an ambitious legislative plan to overhaul the tax code to both boost revenues and reduce income tax rates to spur growth, he's been meeting with his House Republican counterpart, Michigan Rep. Dave Camp, who chairs the tax-writing Ways and Means Committee. Both men have become allies in a common cause.

The growing tax overhaul movement hasn't been given much attention in the major media, but it may be the sleeper issue of the new Congress -- quietly working its way through a lengthy, obstacle-strewn legislative process.

While the bipartisan alliance formed by Baucus and Camp may be the most underreported story in the capital right how, it is gradually becoming the GOP's legislative focus as the party prepares for the pivotal 2014 midterm elections.

"The conference will unite around tax reform," says House Republican Whip Kevin McCarthy of California, who has been hosting "listening sessions" with Camp and other GOP lawmakers to measure its political support.

What Camp is shooting for is a historic overhaul of the tax rates that would shrink them to two brackets, with the top rate falling to 25 percent.

"We're not going to take the current code and see what comes out. We're going to take a blank piece of paper and see what goes back in," Camp told the Post.

The president is seen as virtually out to lunch on this looming legislative issue and its purpose. He hasn't got a clue.

Whenever Obama raises the issue, which is infrequent, he usually talks of reform in terms of raising more tax revenue, not about also lowering the rates to unlock trillions of dollars in venture capital that would put America back to work.

The liberal base of the Democratic Party doesn't want to hear about cutting tax rates, only about raising them on the rich. Obama remained true to this class-driven cause in his first four years, but could he change his tune in his second term?

President Clinton played the tax-the-rich card in his first term with tax increases that pushed the top rate to nearly 40 percent. But after he won re-election, he was signing the Republicans' "make them work" welfare reform bill and enacting the GOP's pro-growth capital gains tax cut, which pushed his second-term economy into overdrive.

Obama is presiding over a second-term economy that is slowing down, again. Durable goods orders plunged 5.7 percent in March. Consumer spending slowed to a snail's-pace 0.2 percent. Economic growth averaged 1.4 percent in the last six months.

If the slowdown continues, Obama may begin looking for something to rescue his presidency from a weak economic legacy. Max Baucus and Dave Camp are preparing to offer him a long-proven, bipartisan, tax rate-reduction remedy. But does he have enough common sense to take it?

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