In 1986, Ronald Reagan’s success at tax reform was due to getting bipartisan support for his initiative, despite Democrats’ concerns that ending tax loopholes and simplifying tax brackets favored the wealthy at the expense of the middle class. President Donald Trump faces a similar challenge albeit in a much more divisive political environment. Because of resistance Trump has faced not only from Democrats but also some Republicans, getting his own tax reform plan through Congress may also depend on getting bipartisan support. It is in Congress, where Republicans have but a slim margin, that Trump will have to push the first major tax reform in more than 30 years.
Reagan held regular meetings that fostered warm relations with House Speaker Thomas “Tip” O’Neill, a Massachusetts Democrat who controlled the Democratic Party’s majority. Those cocktail meetings allowed them to iron out differences between Reagan’s vision for a “revenue neutral” tax reform and O’Neill’s political mantra: “All politics is local.” Ultimately, it was a so-called “Gang of Seven” Democrats and Republicans who steered the bill.
Reagan's gradualism and Trump's boldness
Reagan offered a tax cut in 1981 in his first term, but it was not until his second term in 1986, and after he had made other accomplishments especially in defense and foreign affairs, that he pushed for tax reform. It was thus that Reagan avoided distractions. Trump has not waited for a second term to make good on his campaign promises and it remains to be seen whether he will follow Reagan’s example in getting his tax plan enacted.
A big difference between the two tax reform initiatives is that Reagan’s tax plan was at least 500 pages long, while Trump’s is but one page. However, Trump said he will meet with key stake-holders during the month of May to hold listening sessions. The administration will then iron out details with the House and Senate. Reagan’s experience with a fractious legislature in California, where he served as governor during the tumultuous 1960s, led him to negotiating with Congress in a time-worn fashion. Trump, on the other hand, has long been an executive in business and has offered a tax reform plan in the form of bullet points as goals to be reached. But unlike a business, Trump cannot dismiss Senators or Representatives who do not deliver on his vision. Therein lies a challenge for Trump as he reaches the 100-day mark of his nascent administration.
Passing tax reform in the current environment will be more difficult for Trump than it was for Reagan. There are Democrats in Congress who have gone so far to say that Trump has no mandate and does not reflect the will of the people. Wrangling over the supposed ties to Russia that some members of his administration have, the departure of National Security Advisor Michael Flynn, border security and the flouting of Trump’s executive orders by federal courts in concert with “sanctuary” cities, have contributed to a seething political climate. These issues, plus the threat of war in Asia and the Mideast, are among the distractions.
Reagan proclaimed the need to simplify the tax code and tax breaks. Under Reagan, the number of tax brackets was reduced from 14 to two. Since then, the number has creeped back up to seven. Similarly, Trump is seeking to simplify the tax code with the broad outlines he has introduced, which have borrowed from House Speaker Paul Ryan (R-WI). The details remain to be written. There are commonalities in the visions set out by Trump and Ryan. For example, they both want to reduce the number of tax brackets to just three.
By looking at the Reagan era, Trump and the White House may see a way forward to enacting effective tax reform:
Like Reagan, Trump will need bipartisan support. Even though Republicans are almost assured of passing a tax reform bill in the House, it is in the Senate that there may be some difficulty. Already, there is talk among top Senate Republicans about allowing some tax cuts to expire after a period of time, as was the case with tax cuts enacted during the George W. Bush administration. This is known as “sunsetting.” According to the New York Times, Sen. Roy Blunt (R-MO), a member of the Senate Committee on Appropriations, said that he is open to sunset provisions in order to obtain some tax reform. He told NYT: “You look at the tax cuts from 2002 and 2003 — well over 90 percent of them became permanent law.” Sen. Orrin Hatch (R-UT), who chairs the Senate Finance Committee, told the Daily Caller that sunsetting is sometimes unavoidable. “There’s usually a demand for sunsetting, but I prefer not,” Hatch said. Thus, here are indications of concessions to Democrats.
The Sunset rule
Examples of sunsetting include the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) which expired in 2011. In 2003, Congress passed George W. Bush’s tax cut entitled “Jobs and Growth Tax Relief Reconciliation Act, which also expired in 10 years. These were possible because of the Byrd Rule, named for the veteran West Virginia Democrat Sen. Robert Byrd. According to the Committee on Rules, “Under the Byrd rule, the Senate is prohibited from considering extraneous matter as part of a reconciliation bill or resolution or conference report thereon. The definition of what constitutes ‘extraneous matter’ is set forth in the Budget Act; however, the term remains subject to considerable interpretation by the presiding officer (who relies on the Senate Parliamentarian).”
Senate Republicans would otherwise need 60 votes to stop floor debate of an individual issue in order to move on to the final vote for legislation such as actual tax cuts. That is, of course, if the Senate does not invoke the so-called "nuclear option" that was created by a Democrat-controlled Senate during the Obama administration that reduced the vote requirement from 60 to a simple majority.
At least one Democrat appears to be amenable to sunset provisions this time around. Sen. Dick Durbin (D-IL), Senate Minority Whip, recently told The Daily Caller that he considers expirations on tax cuts to be “reasonable.” Offering that indeed, “all politics is local,” Durbin said, “When it comes to tax policy, you want to make certain that if you’re headed down the wrong road and you’re not getting and you’re not getting your own economic development as you planned, you can revisit it.”
Sen. John McCain (R-AZ) said he will have to think about Trump’s tax reform plan before deciding whether sunsetting its provisions would be an option. McCain was one of two Republicans who voted against George W. Bush’s tax cuts. The Arizona Republican has bucked Trump in the past and was an outspoken opponent during the presidential campaign. It remains to be seen whether he may buck Trump on provisions of the tax reform plan.
Two other Senate Republicans to be brought into the equation for passing the tax reform by a simple majority (50+1), Lisa Murkowski of Alaska and Susan Collins of Maine. The latter recently touted herself on Twitter as the “most bipartisan” Senator in the chamber. Both she and Murkowski have opposed cuts to programs such as funding for Planned Parenthood. While Congress is discussing the upcoming vote on a federal budget, considerations for other pet programs -- of Democrats and Republicans -- will certainly enter the debate over the tax plan, too. It is thus that these three Republicans in the Senate, one maverick and two liberals, may decide the fate of Trump’s one-page vision.
The Most Powerful Man in Government
Senate Minority Leader Chuck Schumer (D-NY) has proclaimed that Trump’s plan would make "life easier for the wealthy and special interests" and "harder for middle class and lower income Americans," which is consonant with the Democrats’ penchant for seeking to punish the wealthy rather than cut spending over modernize the tax code. Schumer added, "This plan will be roundly rejected by taxpayers of all political stripes. The American people, once again, are learning that what President Trump promised in his campaign and what he’s doing are totally at odds." The outspoken Schumer, who is effectively the head of the Democratic Party in the wake of a fractious election of the party co-chairs Tom Perez and Keith Ellison, may actually be the key to seeing any tax reform at all.
Schumer said in January, before Trump’s inauguration, that he saw little possibility of bipartisanship during Trump’s administration. Saying that he and fellow Democrats would fight any Trump nominee to the Supreme Court, Schumer eventually forced the Republicans to use the so-called “nuclear option” to confirm Neil Gorsuch to the Supreme Court. He can be expected to do much the same going forward and to use whatever leverage he has to bring Republicans along with him.
Gorsuch and DeVos
Betsy DeVos's nomination as Secretary of Education was opposed by the entire body of Democrats (including two Independents), plus Republican Sens. Collins and Murkowski. Vice President Mike Pence broke the tie, thus becoming the first vice president in history to vote for a Cabinet confirmation. Neil Gorsuch received 54 votes to confirm his nomination to the Supreme Court. Only three Senate Democrats were able to escape the iron grip of Minority Leader Schumer to cross the aisle and vote for Gorsuch, who had been approved in the past by a Senate controlled by the Democrats. Unless every Republican in the Senate votes in favor of Trump's tax reform, there is only a slim chance of it seeing the light of day. It is thus that "sunsetting" becomes an effective bargaining tool for the reigning Republicans.