Senate Democrats — or 45 of them, anyway — have published a letter outlining their criteria to support tax reform. One of the criteria is inconsequential: They want to pass the bill through regular legislation rather than budget reconciliation. (That’s kind of meaningless, since the only point of reconciliation right now is to avoid having to get Democratic votes.) The other two demands are substantive: The bill must be revenue neutral, and it must not deliver a net tax cut to the highest-earning one percent.
It would definitely be possible to write a tax reform that meets these requirements. The 1986 Tax Reform Act, which enjoyed bipartisan support and which Ronald Reagan signed, did increase the deficit and it actually increased the tax burden on the rich. (The bill lowered rates but eliminated deductions enjoyed by the wealthy.) Tax scholars at the conservative American Enterprise Institute have ideas for tax reform that would meet these criteria, too, explains James Pethokoukis.
But Republican Senate leader Mitch McConnell announced tonight that, because of the letter, he has no intention of working with Democrats, and will instead try to assemble 51 Republican votes for a reconciliation bill.
McConnell himself has said that he favors a revenue-neutral tax reform. (Don’t believe me? Mitch McConnell, May 16: “It will have to be revenue neutral.”) So that means, by process of elimination, that the unacceptable condition is the Democrats’ insistence that tax reform not give rich people a net tax cut.
“I don’t think this is going to be 1986, when you had a bipartisan effort to scrub the code,” McConnell explained. But McConnell is the one who is ruling out a 1986-style reform.
There has been a huge amount of obfuscatory rhetoric around this issue. Republicans have been talking about eliminating deductions and reforming the tax code. Some of them have even said they aren’t going to give rich people a tax cut. But that is because cutting taxes for rich people is extremely unpopular, and they don’t want to come out and say they’re doing something unpopular. But that is the plan, and McConnell has given the game away.