Baucus puts nail in tax reform coffin

Greg Nash

The departure of the Senate’s top tax writer to Beijing could blunt any remaining momentum for tax reform next year, lobbyists and lawmakers fear.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) already faced long odds in getting tax reform across the finish line, in no small part because of a stark divide between the two parties on revenue.

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But K Street had held out hope that somehow, someway, Baucus and Camp would make the seemingly impossible happen.

Now, with Baucus likely moving out of the picture to become the U.S. ambassador to China, the divide between the parties on the revenue question appears more daunting than ever.

“A driving force for this effort has been Sen. Baucus,” said Micah Green, co-chairman of Patton Boggs’s financial services and tax practice. “Him stepping out of that role raises natural questions about the timing of this effort.”

“Baucus obviously was very interested in doing tax reform,” said Sen. John Thune (R-S.D.), a member of the Finance panel. “For him, I think he wanted it as his last lap here.”

Still, downtown lobbyists and lawmakers with an interest in tax reform are taking heart in the fact that Sen. Ron Wyden (D-Ore.), who has long had his own ideas for overhauling the tax code, looks ready to step in and take over the Finance gavel.

Wyden has said that he wouldn’t speculate on who would take over at the committee until an official announcement is made on Baucus.

But the only Democrat with more seniority on the panel, Sen. Jay Rockefeller (W.Va.), is not seeking reelection in 2014 and has shown no interest in taking over the panel for just one year.

“For those who want to see tax reform done, if it doesn't get done before Sen. Baucus leaves, Wyden is a good choice,” said Jade West, senior vice president of government relations of the National Association of Wholesaler-Distributors.

Wyden first released his own tax reform plan in 2010 with then-Sen. Judd Gregg (R-N.H), which he then updated with Sen. Dan Coats (R-Ind.).

“You have one reformer going to China, and you have one reformer taking over the chair,” Green said. “Ron Wyden is someone who has been very vocal in his support of comprehensive tax reform.”

The Oregon Democrat also has long been willing to work across the aisle, including on a Medicare plan with House Budget Committee Chairman Paul Ryan (R-Wis.).

Ryan made clear this week what many had long expected — that he wants to take over the Ways and Means Committee gavel in 2015, since Camp is term limited.

With few expecting tax reform to get done next year, that would mean that the tax chairmen in the next Congress would already start with a solid working relationship.

Still, Republicans seeking tax reform sooner rather than later caution not to give up on Camp. The Michigan Republican’s principles for tax reform do overlap with Wyden’s, as one House GOP aide pointed out.

Camp and House Republicans, for instance, want to get the top corporate rate down to 25 percent, very close to the 24 percent laid out by Wyden and Coats.

The Wyden-Coats plan also would collapse the current seven individual tax brackets into three — 15 percent, 25 percent and 35 percent. That top rate is 10 percentage points higher than House Republicans are shooting for.

“I’m pretty excited about that possibility,” Coats told The Hill about Wyden potentially becoming Finance Committee chairman.

“This thing has been vetted,” Coats said about his tax reform bill with Wyden. “It has been worked on a bipartisan basis. There are pieces of this that could be the foundation and building blocks for a truly comprehensive product.”

Wyden, currently the chairman of the Energy and Natural Resources Committee, has also been complimentary of some of the building blocks that Baucus has put into place on tax reform.

He has also pushed to extend expiring tax provisions, especially those for renewable energy, that have been held up so far this year, which could give efforts to retroactively extend those provisions next year a shot in the arm.

Baucus has released four discussion drafts in recent weeks on tax reform, including a draft this week on clean energy incentives that drew quick praise from Wyden.

“Whoever takes over would have a foundation already built,” said Sen. Robert Menendez (D-N.J.), another Finance Committee member. “It would be a question of whether they feel that that foundation is laid the way they want it.”

Still, given that Baucus and Camp have worked nonstop on tax reform for three years now, lobbyists and lawmakers also wonder if any tax panel chairman could successfully get tax reform off the ground in the next several years, even someone like Ryan, who has deep respect among Republicans on fiscal issues.

Wyden, for instance, said Thursday that it looked like House momentum on tax reform had stalled. And Republicans like Thune see little chance that tax reform will rev up in the coming months unless President Obama makes a rewrite of the tax code more of a priority.

“I think the philosophical differences — I don’t expect that changes from Baucus to Wyden or whomever,” the South Dakota Republican said. “I still think their deal is going to be, we need taxes out of this.”

The Democratic leadership in the Senate, and GOP leaders in the House have both seemed lukewarm at best to tax reform in recent months, if for very different reasons.

Senate Majority Leader Harry Reid (D-Nev.) and other top Democrats in the chamber have poured cold water all over Baucus’s efforts, demanding that tax reform raise more revenue than the Finance panel chairman is willing to deliver.

In the House, Speaker John Boehner (R-Ohio) and his lieutenants have been more than willing to let voters concentrate on the troubles weighing down ObamaCare.

The GOP rank and file in the House also aren’t totally sold on a plan that would slice very popular tax breaks, forcing Camp to back away from his plan to release and mark up a tax overhaul.

Sen. Ben Cardin (D-Md.), also a tax writer, said the recent two-year budget agreement, which sets top-line numbers into the next Congress, took away even more of the motivation for reform.

“I’m not optimistic you’re going to see a broad-based reform proposal,” Cardin told The Hill.