The Demo­crat who knows the tax code is a “rot­ting car­cass”

The Denver Post - - PERSPECTIVE - By George F. Will

Cyn­ics are said to be peo­ple who are pre­ma­turely dis­ap­pointed about the fu­ture. Such dys­pep­sia is en­cour­aged by watch­ing Repub­li­cans strug­gle to move on from the dog’s break­fast they have made of health care re­form to the mare’s nest of tax re­form. Con­cern­ing which, House Speaker Paul Ryan, whose preter­nat­u­ral op­ti­mism makes Can­dide seem mo­rose, says: “If we’re go­ing to truly fix our tax code, then we’ve got to fix all of it.” Try­ing to fix “all of” im­mi­gra­tion in 2013 and health care in 2010 with “com­pre­hen­sive” leg­is­la­tion left al­most ev­ery­one ir­ri­ta­ble. Per­haps the third time is the charm. Sen. Ron Wy­den is skep­ti­cal about fix­ing much this year, even given Se­nate Ma­jor­ity Leader Mitch Mccon­nell’s de­ci­sion to limit the Au­gust re­cess.

The fourth-most se­nior Demo­crat and rank­ing mi­nor­ity mem­ber on the tax-writ­ing Fi­nance Com­mit­tee, Wy­den, 68, is usu­ally re­laxed but now is es­pe­cially so, for two rea­sons. He was just elected to a fourth term. And for him and other Fi­nance Com­mit­tee Democrats, tax re­form is, so far, an un­de­mand­ing spec­ta­tor sport. This was un­der­scored last weekend when, as he was be­ing driven from one Ore­gon town hall to another, he read a Wall Street Jour­nal story head­lined: “GOP Tax Over­haul’s Fate Rests on ‘Big Six’ Talks.”

Five of the six were in an al­most taunt­ing photo pro­vided to The Jour­nal by Ryan’s of­fice — Ryan, Mccon­nell, House Ways and Means Com­mit­tee Chair­man Kevin Brady, Se­nate Fi­nance Com­mit­tee Chair­man Or­rin Hatch and Trea­sury Sec­re­tary Steven Mnuchin. The miss­ing sixth per­son was Na­tional Eco­nomic Coun­cil Di­rec­tor Gary Cohn. No con­gres­sional Demo­crat is in­cluded. Ev­i­dently, Repub­li­cans plan to pass tax re­form with­out Demo­cratic votes, un­der “rec­on­cil­i­a­tion,” which is in­her­ently par­ti­san — 51 votes will suf­fice — and lim­its de­bate to 20 hours. The 1986 re­form, the gold standard of bi­par­ti­san tax leg­is­la­tion, was on the Se­nate floor for more than 100 hours spread over 20 days — af­ter seven days of hear­ings and 16 days of mark-up.

Ryan and Mccon­nell say tax re­form will be “rev­enue neu­tral.” This might re­quire dy­namic scor­ing — cal­cu­lat­ing that re­formed in­cen­tives will stim­u­late eco­nomic growth — to project im­plau­si­ble growth rates. Plau­si­bil­ity is, how­ever, op­tional, as it was in April, when Mnuchin’s depart­ment pro­duced a tax plan that re­sem­bled Lin­coln’s “soup that was made by boil­ing the shadow of a pi­geon that had starved to death.” The doc­u­ment — “shorter than a drug store re­ceipt,” says Wy­den — was one page long, con­tained 218 words, eight num­bers and a thump­ing vacu­ity, the prom­ise to “elim­i­nate tax breaks for spe­cial in­ter­ests.”

Last Novem­ber, Mnuchin told CNBC there would be “no ab­so­lute tax cut for the up­per class,” mean­ing no net cut af­ter lost de­duc­tions. In Mnuchin’s Jan­uary con­fir­ma­tion hear­ing, Wy­den mis­chie­vously sug­gested call­ing this “the Mnuchin rule,” which en­thralled Mnuchin, who later said: “I feel like I’m now in good com­pany with the Vol­cker rule and the Buf­fett rule.” In a June hear­ing, how­ever, Mnuchin told Wy­den: “You made it a rule, I didn’t make it a rule.” It would be en­ter­tain­ing to watch Repub­li­cans try to ad­here to that rule while ful­fill­ing their prom­ise — from which they be­gan re­treat­ing on Tues­day — to re­peal the 3.8 per­cent Oba­macare tax on in­vest­ment in­come.

No Demo­crat, says Wy­den, likes the sta­tus quo. When he re­cently de­scribed the tax code as “a rot­ting eco­nomic car­cass,” his wife asked him to stop scar­ing the chil­dren. The com­plex­ity of the code, which is more than 4 mil­lion words, is why Amer­ica has more peo­ple em­ployed as tax pre­par­ers (1.2 mil­lion) than as po­lice and fire­fight­ers. If tax com­pli­ance were an in­dus­try, it would be among the na­tion’s largest; it de­vours 6.1 bil­lion hours an­nu­ally, the equiv­a­lent of more than 3 mil­lion full-time work­ers.

Wy­den knows he sounds like “a one-song juke box” when he keeps stress­ing “wage growth,” but he notes that last week the en­cour­ag­ing num­ber of jobs cre­ated in June (222,000) was ac­com­pa­nied by dis­cour­ag­ing wage growth (yearover-year, 2.5 per­cent, barely ahead of in­fla­tion). Many econ­o­mists are puz­zled that low un­em­ploy­ment (4.4 per­cent) is not forc­ing em­ploy­ers to bid up the price of la­bor. Wy­den says he is puz­zled by nei­ther the cause (per­sis­tent slow growth, limp­ing at around 2 per­cent) nor the cause of this cause — in­suf­fi­cient money in mid­dle-class pay­checks to power an econ­omy where 70 per­cent of the fuel comes from con­sumer spend­ing. He fa­vors, for ex­am­ple, doubling the earned in­come tax credit. He seems, how­ever, to be pre-emp­tively, but not pre­ma­turely, dis­ap­pointed about a leg­isla­tive process that will fall some­what short of fix­ing “all of” what ails the rot­ting car­cass.

E-mail George F. Will at georgewill@ wash­post.com.

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