Happy Anniversary, Tax Reform

Twenty-five years ago today, President Ronald Reagan signed the Tax Reform Act of 1986 into law.

Happy silver anniversary, tax reform!

Over at the Tax Policy Center, Len Burman and Gene Steuerle, both Treasury staffers at the time, and Howard Gleckman, who covered the proceedings for BusinessWeek, offer personal reflections on how TRA86 happened and what that means for today’s efforts.

Gene offers a recipe for increasing the odds of productive tax reform:

If there is any lesson from TRA86, it is that  real reform requires channeling forces and information in the right  direction.

Put more broadly, it isn’t helpful to  try to recreate  historical circumstances to get the same outcome.   It is far more useful to understand how to  convert luck into serendipity to increase the odds that good things will happen.

In a recent testimony and a Tax Notes article, I outlined ten steps that increased the chances of reform in 1986 and for the most part are repeatable today.  These include;  seize today’s, not yesterday’s opportunities; rely on principles like equal justice under the law to determine what should be done; make reform comprehensive, in part, because the political cost is likely to be the same in any case; shift the burden of proof to those opposing the better system; form liberal-conservative coalitions in areas where both sides can gain something;  plan strategies in advance for  how to best present the proposals and their effects  to the public; empower nonpartisan staffs like Treasury’s Office of Tax Policy and the Joint Committee on Taxation (who really assembled the ’86  reform); establish leadership on a variety of fronts;  insure accountability so that very specific political leaders bear a significant cost if reform fails; and empower someone to run with the ball and strategize on how to make reform happen.

In 1984 through 1986, much of the political leadership came late to  the game.  And some of the lessons of 1986  were learned, not planned. For example, one key to passage was that at each step in the process, first Treasury Secretary Don Regan, then House Ways & Means Committee Chair Dan Rostenkowski, and finally Senate Finance Committee Chair Bob Packwood feared they would be blamed if the bill failed. As a result, each worked extremely hard to  make sure that tax reform did not die on their watch.

Len agrees on the need, but is feeling a bit more gloomy:

Tax reform has never been more necessary, it’s hard to see a solution to our budget problems without it, and it’s just impossible.

And Howard points to the president–whoever that might be–as the key to the Tax Reform Act of 2013:

Tax reform will make nearly everyone mad. Big-bucks subsidies will be slashed or killed. Political demagoguery will run wild. The Reagan Administration saw that reform would only work if it began with a very specific plan that the White House owned. And President Reagan eventually became its best salesman. My Tax Policy Center colleague Gene Steuerle—who helped write TRA 86—always says the secret to success in Washington is writing the first draft. Put it this way: President Obama’s health reform strategy, which left the dirty work to Congress, is not the way to go.

2 thoughts on “Happy Anniversary, Tax Reform”

    1. Hi Spencer – The big Reagan tax cuts were actually in 1981 (the Economic Recovery Tax Act of 1981). That effort celebrated its 30th anniversary back in August. And, as you say, key elements were undone beginning in 1982.

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