These days it’s hard to imagine Democrats and Republicans working together on anything, let alone teaming to fundamentally reform the federal Tax Code. But we both served in the House in 1986 and can testify to the fact that not only is bipartisan tax reform possible — it seemed just as impossible 25 years ago as it does today.
In fact, bipartisan tax reform seemed so far-fetched when President Ronald Reagan first proposed it in his 1984 State of the Union address, members in the chamber laughed. Reagan asked: “Did I say something funny?”
But what Democrats and Republicans achieved in 1986 is far from laughable. A Republican-led Senate and a Democratic-controlled House worked with a Republican president to fundamentally change the way American families and businesses pay taxes. The final bill didn’t just receive one or two bipartisan votes; it passed the Senate Finance Committee — on which we both serve — by a vote of 20-0.
Not only did the two parties do what had long been considered impossible, the Tax Reform Act of 1986 helped spur a period of economic certainty and growth that led to the creation of more than 6.3 million jobs in the following two years.
Given that success, it is no wonder Republicans and Democrats, as well as economists, think tanks and bipartisan commissions are again calling for tax reform. Congress has made more than 15,000 changes in the federal Tax Code since 1986. It now includes more than 10,000 pages, and Americans currently spend more than $163 billion a year just filing their taxes.
So how did we do it in 1986?
While Reagan was able to pass targeted tax cuts early in his term, he recognized that long-term economic growth would require a full-scale overhaul of the federal Tax Code.
He found an unlikely ally on the other side of the aisle in then-Sen. Bill Bradley, who saw tax reform as a unique opportunity to bring Democrats and Republicans together. Democrats wanted the Tax Code to be fair. Republicans wanted to promote economic opportunity. Tax reform, Bradley said, would do both.
Many in Congress expressed support for comprehensive reform. But — like today — the politics behind eliminating tax breaks and loopholes led many to believe that tax reform was impossible.
Reagan, however, was undeterred. When his administration’s first proposal was largely panned, he put White House chief of staff James Baker, in charge of the Treasury Department and directed the department to try again.
Reagan called for tax reform again in his 1985 State of the Union address and released the Treasury Department’s new plan in a televised address to the nation months later.
When the powerful House Ways and Means Committee Chairman Dan Rostenkowski was asked to give the Democratic rebuttal, he found himself in a situation of having to respond to a Republican president calling for the same tax fairness and simplicity that was at the heart of the Democratic agenda. So Rostenkowski took the unusual step of praising the Republican president for “joining Democrats in Congress to try to redeem this commitment to a tax system that’s simple and fair.”
The-then Republican chairman of the Senate Finance Committee solidified Republican support by championing what he called a “radical” approach that slashed tax rates below even Reagan’s proposal.
Of course, it wasn’t that simple, but the rest is history. Democrats and Republicans stopped fighting each other and joined forces against the special interest lobbyists fighting to retain their clients’ tax preferences and loopholes. Reagan signed the bill into law on Oct. 22, 1986 — two weeks before a midterm election.
As it turned out, the differences that typically scare Republicans and Democrats away from compromise were the keystones of their alliance. Republicans were able to broaden the tax base and dramatically lower tax rates by eliminating special breaks and loopholes, which represented the fairness that Democrats wanted.
Tax reform succeeded when each side realized the best way to get what it wanted was to give the other side what it wanted.
Twenty-five years later, that axiom still holds true. Working together, Republicans and Democrats can lower rates for businesses and working families and make the Tax Code fairer by eliminating tax breaks. Working together, Democrats and Republicans can make tax compliance less of a burden on U.S. taxpayers and a bipartisan effort can promote economic growth and certainty by moving away from what has become common practice of temporary tax extensions.
Just like in 1986, Democrats and Republicans can achieve far more for the country by working with each other than we ever will working against each other.
It sounds impossible now, but again, just like in 1986, sounding impossible isn’t the same as being impossible.
Sen. Ron Wyden (D-Ore.) serves on the Senate Finance and Budget committees. Sen. Olympia Snowe (R-Maine) serves on the Senate Finance Committee.Date | Title |
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