The annual deadline for filing taxes is guaranteed to bring out plenty of discussion of tax reform, and with a new president in office, the buzz is inevitably going to be even louder. Unfortunately, that new president is Donald Trump, so this year's political discussion about taxes has become both deafening and stupefying.
Trump never offered anything resembling a real tax plan during the campaign, contenting himself with a half-baked set of sound bites about cutting taxes for businesses, along with a super-sized version of Jeb Bush's mishmash of regressive tax cut proposals. Congressional Republicans, meanwhile, are even less united on tax policy than they were on health care, and Paul Ryan's weak plan is now apparently dead.
Earlier today, I was interviewed on KCBS radio in San Francisco about the prospects for tax reform this year. (Somewhat amusing aside: The last time I was on KCBS, they introduced me as a professor at Georgetown, while this time they introduced me as a professor at Washington University. Given that I actually teach at George Washington University, they sorta kinda got it right in the aggregate.)
In response to a question about tax complexity, I decided to go with a mathematical analogy: "If you think health care is complicated, tax reform is like health care multiplied by health care raised to the power of health care." And as I wrote last week about congressional Republicans: "Even people who are well informed and acting in good faith have reasons to move strategically to kill tax bills. And these guys are ignorant and malevolent."
I have, in fact, seen discussions of tax policy among well informed people who are all apparently motivated by good intentions. Usually, this is in an academic setting. Even there, however, the conversation is far from a Platonic discussion of tax policy. I know, for example, that a lot of the professors in those discussions either have ideological priors or are trimming their sails to be able to carry water for political patrons -- current or future.
Even so, there is at least some sense that no one is there to push for policies because she will personally benefit from them. And even some of the people who are in the political trenches occasionally try to do what they think of as the right thing. Although I disagree with nearly everything that he proposed, for example, I did have the sense that former Ways & Means committee chair Dave Camp truly was trying to reform taxes in a way that he thought would be good for the world.
Of course, Camp's proposal was promptly trashed by then-Speaker John Boehner, and Camp retired in frustration two years ago at the age of 61. Again, I do not weep for the loss of the Camp tax reform bill, but I do give credit to someone who was reasonably well informed and obviously trying to forge a compromise that would be a tough political slog.
Now, however, the House leadership includes no one who comes close to resembling Camp, and the hackishness of Paul Ryan's team is as obvious as it is astonishing. With Trump having no political skills but maintaining a deep commitment to using debt as the centerpiece of his business model, he only makes the process more difficult for everyone, especially people (including some Republicans) who want to make the tax code less debt-friendly.
In short, I continue to believe that either nothing will come of Republicans' current efforts to try to pass a tax bill or that it is impossible to predict what could emerge from this mosh pit. There are no grand principles driving Republicans' various ideas on tax reform, unless one counts "comfort the comfortable and afflict the afflicted" as a touchstone of political philosophy.
Because there are so many different ways to change the tax code regressively, there is every reason to think that Republicans will get in each others' way and not be able to agree on anything. Maybe they will come up with a Frankenstein's monster and call it tax reform, but probably not.
What about the Democrats? The interviewers on KCBS asked me about recent reports that congressional Democrats will not negotiate with Trump on taxes until he releases his tax returns. In a four-minute interview, there was no time for followup, but my on-air response went something like this:
"I think that the Democrats must be hoping that Trump won't call their bluff. After all, imagine that Trump suddenly released his tax returns for, say, the last forty years, including all pages of the returns in all their gory details, and there was no question that the returns were accurate. Would Democrats really then decide to start working with Republicans, who want to make the tax code regressive?"As far as it goes, I am still comfortable with that answer. Democrats are, I am quite sure, highly confident that Trump will never, ever release his tax returns. That means that every time Democrats see an opportunity, they will say, "Well, if Trump would only release his tax returns, ..." And I have no doubt that they would be seriously caught off guard if Trump took away this talking point.
But Democrats are now saying that the specific reason that they want to see Trump's tax returns is that they want to make sure that Trump's negotiating positions are not motivated by his personal greed. This means that, even if Trump actually did decide to release his tax returns, the Democrats could win politically by showing how virtually any Republican-favored tax reform plan would benefit Trump and his family.
Interestingly, this has been true of almost every Republican presidential nominee (and almost everyone who has run for president as a Republican) since at least 1960. That is, conservative tax proposals tilt toward the wealthy, and Republican nominees tend to be wealthy. (Maybe Gerald Ford is an exception?) Democrats have nominated some plutocrats, too, but their policies are not self-enriching for those nominees.
The 2008 and 2012 Republican nominees, John McCain and Mitt Romney, are not billionaires, but they are certainly moneyed men. McCain famously lost count of how many houses he owned through his fabulously wealthy wife, while Romney seemed to think that betting $10,000 with Rick Perry amounted to chump change.
Even so, Democrats would not have been able to make much political hay out of the fact that tax plans favored by those nominees and their party would have been personally enriching for the nominees. There was not a whiff of greed in the air around either man's presidential run. I am glad that both lost, but I was never worried that they were trying to feather their own nests.
Trump is obviously different. His stubborn refusal to release his tax returns blends seamlessly with his refusal to keep his hands off his own businesses while in office, ultimately making the Trump White House look as corrupt as Tammany Hall. Add in Trump's blatant nepotism, and the tawdriness of it all becomes overwhelming.
This means that my answer on the radio was not wrong, but it was only half right. If Trump does not release his tax returns, Democrats will be able to beat him over the head every day by holding to their principled position that the tax code should not be changed in ways that could enrich this highly secretive and money-grubbing president.
If Trump surprises everyone and releases his returns, however, the Democrats will still win. After all, they are not saying, "We'll vote for any tax reform bill that you put in front of us the day after you release your tax returns." They are saying only that they will negotiate in good faith on a bipartisan compromise tax plan (that might also include other features, such as infrastructure spending) once we are able to assess all tax proposals in light of whether they would help or hurt Trump and his family.
If we were ever to reach that point, however, the Democrats would score multiple wins. First, they would have forced Trump to change his mind, making Trump look weak and indecisive. Second, they would have pried loose information that will surely look bad politically for Trump. As I have written before, Trump's tax returns will not tell us everything, but they will surely tell us something. And it will not be pretty for Trump.
Third, and most importantly, the tax debate itself would be forever changed. The Democrats would be able to use the information in Trump's tax returns to make the case for progressive tax reforms.
Therefore, while Democrats would be able to say in all honesty that they are willing to work with Trump and the Republicans to find common ground on tax reform, that ground would have shifted in their favor in response to the public revulsion that would surely emerge from the release of Trump's tax and financial details.
Democrats have deserved much criticism over the years regarding their ineffectiveness as both the majority and the minority party in Congress. Between the Democrats surprising ability to make the best of a bad situation with the Gorsuch Supreme Court nomination last week, and now their savvy use of Trump's tax returns, there are signs of life on the left side of the aisle.