Blog

Repeating the Miracle of '86: Advice from Bill Bradley on Tax Reform

    Last month, the White House introduced a program that would effectively overhaul the tax code and, as Robert Kuttner put it, "locked [Obama] in as a defender of social insurance and working Americans." The five-pronged tax plan would cut rates and inefficient and unfair tax breaks, increase investment and growth in the United States, reduce the deficit by $1.5 trillion over 10 years and -- most contentiously -- institute the "Buffett rule." The rule would require individuals with incomes of $1 million or more to pay at least the same percentage in taxes as middle-income Americans.

    The fate of Obama's tax plan -- and the proposed reforms -- is likely to be decided by the Super Committee charged with reduced the deficit under the debt ceiling deal. Producing a plan of real value will be no easy feat; aside from an ideological gap -- in general, the conservative members are more conservative than the liberals are liberal -- the committee will have to withstand an onslaught of lobbyists, who, according to Bloomberg News, are trying to shape the reforms. Already, the committee has been swarmed by lobbyists from a wide range of groups, including energy, contractors, private equity and hospital organizations.

    Already, it is reported, K Streeters are getting readouts from closed door meetings of the Super Committee. These lobbyists, observes Politico, "still have plenty of political currency, despite familiar calls for reform and greater transparency that flared in the past election."

    That is not good news. As reported in Jeffrey Birnbaum's and Alan Murray's Showdown at Gucci Gulch, an account of the passage of the Tax Reform Act of 1986, lawmakers can't get anywhere on tax reform unless they can fend off lobbyists. As Birnbaum wrote, 20 years after the fact, "Any tax-reform effort will be doomed if lobbying groups are united against it."

    For advice on how the super committee might thread the needle, I turned to the man who sponsored and spear headed the Tax Reform Act of 1986: former Senator Bill Bradley, who is now a managing director at Allen & Company.

    Bradley believes that, despite the greater number of lobbyists, enacting tax reform shouldn't be any more difficult now than it was then. "There were more corporate interests that had to be gored," he told me. That's true. Prior to the '86 reforms, the oil and gas industry, as well as real estate, benefited "disproportionately" from loopholes.

    If the Super Committee wants to include revenue in the plan, the real problem will be keeping what Bradley calls "the big five" at bay: mortgage interests, healthcare, pension build-up, charitable contributions and property taxes.

    "They all feed certain interests. They're very organized and will cry Chicken Little. That's just the nature of what they're paid to do," he said. Ultimately, he observed, "you have to step back and make a judgement about what's the best interest of the country."

    Bradley also warned against "doing social policy through the tax code." He cited President Clinton's inclusion of credits for individuals who care for elderly Alzheimer's-stricken family members: "Clinton put so many of these tiny things in the code to salve constituencies, so he that would have a talking point."

    In any case, meeting the December deadline is going to be difficult. As Bradley put it, a fully-formed proposal is not "going to come out of the middle of the night, the immaculate conception. This full thing is not going to be born. At some point, somebody's got to say, This is what we're doing, this is what we want. And then you make compromises. But if you don't have any principles, the compromises are all going to be political."