There is an alarming leadership vacuum in the White House that threatens to doom President Trump’s legislative agenda. The absence of leadership from President Trump and his team has already undermined efforts to repair or replace the Affordable Care Act. Now it threatens prospects for passing a significant tax reform, President Trump’s top legislative priority.
According to Trump’s recent sketch of a tax reform proposal — and it is no more than a sketch — he wants to cut taxes, eliminate tax preferences and avoid increasing the deficit. That is an excellent prescription for tax reform, but the part involving limiting tax preferences will be very unpopular and hard to get through Congress without presidential leadership.
There are many provisions of federal tax law that cost the government revenue. Deductibility of home mortgage interest, of charitable contributions, of state and local taxes, of employer contributions for health insurance and preferential treatment of carried interest are just a few of the tax preferences that reduce the tax base. There are hundreds more, each protected by determined guardians.
Congress is good at distributing benefits and tax cuts, but bad at taking them away. Tax reform can succeed only if Congress can confront the army of lobbyists who will mobilize to safeguard special tax provisions against tax reform. Judging by past experience, Congress will stand up to this army of lobbyists only if they see energetic presidential leadership on the issue.
By leadership, I mean that the president must provide a detailed plan for tax reform and take initiative promoting the provisions that take lucrative tax benefits away from powerful interests. The president needs to give high-profile speeches defending unpleasant aspects of a plan. He needs to line up allies and supporters of tax reform to help make members of Congress feel that the risks of voting for tax reform are manageable.
So far President Trump has done none of this. His speeches on tax reform highlight only the giveaways of a tax bill, none of the takeaways. He does not acknowledge that tax reform involves important trade-offs.
Rather than build support for cutting back on tax preferences, President Trump takes proposals off the table. On Monday, when rumors circulated that Congress might be planning to limit deductibility of 401(K) contributions, Trump tweeted that would not happen.
The Trump administration approach to tax reform stands in stark contrast to the 1986 Reagan tax reform, which was aided hugely by President Reagan’s leadership. The Reagan-era tax reform of 1986 began in the Treasury Department, which devised a bold proposal. The Treasury plan eliminated tax expenditures and used the resulting new revenue to cut income tax rates to their lowest levels in decades — without increasing deficits.
It was a controversial plan because it cut so many popular tax provisions, but President Reagan backed it firmly. Reagan was personally active in support of the bill, making calls and urging members of Congress to vote for the bill. The bill Congress finally passed as very different than Reagan’s initial proposal, but his leadership made it far easier for members of Congress to vote for the controversial elements.
So far it appears that the Trump administration will leave it to Congress to sort out the messy details of tax reform. Earlier this year President Trump repeatedly promised that his administration would produce a proposal to reform or partially repeal the Affordable Care Act. The plan never appeared, and it was left for Republicans in Congress to devise an ACA replacement. They tried several times, but all of their efforts failed. Real leadership from the White House in devising a plan could have made a difference.
Lack of leadership from the Trump White House characterizes their approach to legislative matters. On health care, immigration and the Iran nuclear deal, Trump has announced a goal and left it to Congress to figure it out. This approach demonstrates a profound misunderstanding of how Congress works.
Without presidential leadership, a tax reform with reduced tax rates, significant reduction of special tax provisions and revenue neutrality is all but impossible.
Left to devise a tax bill on its own, Congress will do what it does best — try to make people happy without making other people unhappy. It will cut taxes but do nothing to pay for them. This outcome will be bad for the country and bad for President Trump.
Now is the time for President Trump to end the leadership vacuum, help pass a genuine tax reform and save his presidency.
Gilmour is professor of government and director of the Public Policy Program at the College of William & Mary in Williamsburg, Va.