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    Why We Won't See Federal Tax Reform
    The Vault

    Why We Won't See Federal Tax Reform

    July 2015

    Rewriting the tax code remains a critical long-term priority.  But the hopes for this Congress passing true tax reform before the next election are all but gone.  Senate Majority Leader Mitch McConnell, when asked about his priorities in the next year, said there was no hope in passing true tax reform under this president.  And Democratic leaders are equally scathing about Republican leadership; each side blames the other for a lack of resolve.  But is this the only thing that’s holding us back?

    Partisanship is a given and it runs deep in Washington -- perhaps more so than ever before -- but challenges to true tax reform run deeper than that.  First, neither party wants to be the first to call for repealing, or even trimming, popular tax breaks -- the inevitable price of lower rates if reform is not going to add to the national debt.  Dave Camp, former GOP House Ways & Means Committee Chairman, tried it and wound up alone and unsupported by his own leaders.  Then there are the broader policy issues.  Democrats, many of whom run on issues of income inequality, will back more targeted middle-income tax breaks, not fewer.  Comprehensive tax reform is simply not on their agenda.  As for Republicans, they are all over the place: flat taxers, fair taxers, x-taxers, income tax reformers, you name it.  If the two parties can’t agree on how much money the tax system ought to raise (and they can’t), arguments over design are futile.   Targeting narrower legislation (e.g., simplifying low-income credits, improving treatment of charitable contributions), sadly doesn’t look much more hopeful.  Lawmakers simply can’t seem to come to a consensus on what they want to fix.

    The nail in the coffin just might be the fact that Congress faces a mountain of must-pass bills between early September (after its 5 week recess) and next December.  More pressing issues like the highway bill, expired tax provisions, the debt limit, and, of course, funding to keep the government running, will likely get swept up in a single, terribly complicated bill this fall.  You can expect the drama from it and the upcoming election to keep Congress busy.  Tax reform, once again, is on the back burner.


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