Tax overhaul effort lacks advantages Reagan enjoyed in 1986

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Posted: Mar 28, 2017 3:49 AM
Tax overhaul effort lacks advantages Reagan enjoyed in 1986

WASHINGTON (AP) — The fundamentals of tax overhaul were strong some 30 years ago.

A popular president, Republican Ronald Reagan, pushed the landmark 1986 measure. Powerful and experienced congressional leaders shepherded the legislation with bipartisan support. Key players had established, trusting relationships.

The situation facing President Donald Trump features none of those advantages. His party is divided and his congressional leadership is weakened after the health care debacle. Key players are inexperienced. Trump has record low approval ratings. Republicans who control all of Washington are planning on going it alone, without help from Democrats.

Now, there isn't even basic agreement on what revising the tax code is. Trump is promising "massive tax relief for the middle class." Congressional leaders are pushing an overhaul that would keep gross tax revenues roughly the same — "revenue neutral" in Washington-speak — while clearing away many tax breaks and using the resulting savings to lower rates, with the top brackets getting most of the benefit.

The White House says it wants to devise a plan while Capitol Hill Republicans would prefer to take the lead.

Still, Rep. Kevin Brady, R-Texas, chairman of the tax-writing Ways and Means Committee, said Monday, "As challenging as tax reform can be, we have, I think, all the elements in place to deliver better than Reagan reforms going forward."

A look at the fundamental factors facing the effort, then vs. now:

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PRESIDENTIAL STRENGTH

THEN: Reagan entered the tax debate after winning re-election in 1984 in an electoral landslide and unveiled his initial tax plan that November. Treasury Secretary James Baker had four years' experience as White House chief of staff. The administration had passed the landmark 1981 tax cut through a Democratic-controlled House and had passed a follow-on bill increasing taxes. Reagan commanded loyalty among Republicans and, more broadly, was helped by approval ratings that stayed above 60 percent during most of the almost two-year tax overhaul effort.

NOW: Trump is unpopular, with his approval ratings in the benchmark Gallup Poll plummeting to just 36 percent on Monday. His White House staff is inexperienced, undermanned and plagued by backbiting. Treasury Secretary Steve Mnuchin, a former Wall Street executive, is a Washington neophyte. Last week, Mnuchin said: "Health care is a very complicated issue. In a way, tax reform is a lot simpler." Chief of Staff Reince Priebus is under pressure after failing to deliver on health care, and congressional Republicans are unsure who's running the show.

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CAPITOL COHESION

THEN: The balance of power — a Republican president, GOP-controlled Senate and Democratic-led House — required bipartisanship, which meant individual lawmakers and rogue factions had less influence. Those making a list of the most effective, experienced, legislators of recent decades would have to include Illinois Reps. Bob Michel, Reagan's loyal GOP soldier in the House, and Dan Rostenkowski, D-Ill., who did the heavy lifting for Democrats. In the Senate, Bob Packwood, R-Ore., and Bill Bradley, D-N.J., drove the effort, despite reservations among higher-ups. More broadly, Congress was a far different institution, with cross-party alliances, numerous Democratic moderates and fewer conservative zealots. Chairmen held much more power and were generally given greater deference. Lawmakers generally were more capable and experienced at legislating.

NOW: Congress is remarkably polarized and dysfunctional, and fewer lawmakers know the ropes. The game plan for GOP leaders is to pass tax reform by relying almost exclusively on Republican votes and utilizing filibuster-proof procedures in the Senate. That is likely to require Republican unity that's hardly on display now. Republicans controlling the House are grappling with the shift from simply opposing President Barack Obama for eight years to acting like a governing party. Almost all the key players are less seasoned than their 1986 predecessors, starting with House Speaker Paul Ryan, R-Wis., who was hobbled during the health care debacle by the hard-right Freedom Caucus. Brady is relatively inexperienced; his Senate counterpart, Finance Chairman Orrin Hatch, R-Utah, has slowed a bit at 83.

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DEVILISH DETAILS

THEN: The tax code was a loophole-cluttered mess, with 14 tax brackets and a top rate for individuals of 50 percent. But the structure of the code permitted lawmakers to cut back on corporate tax preferences and shift some of that revenue to help cut tax brackets for individuals.

NOW: Loopholes and expensive tax preferences have crept back into the code. The top tax rate for upper earners is 39.6 percent after tax hikes in 1993 and 2013. But simply cutting loopholes and preferences, at least for individuals, won't get the rates much lower. To try to lower corporate tax rates further, House Republicans are pushing a deeply controversial plan to tax imports that's a dead letter in the Senate. And the failure of the health care bill harmed the effort for arcane accounting reasons that will make it more difficult to cut rates for individuals.