Only in Washington would retirement be a sign of tax reform progress

Does this look like someone who will fix the US tax code in the next two years?
Does this look like someone who will fix the US tax code in the next two years?
Image: AP Photo/J. Scott Applewhite
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American companies that—like Apple—would dearly love to see an overhaul of the tax code might have taken heart at today’s news that Max Baucus, the Democratic chairman of the powerful Senate finance committee, will retire at the end of his term. Without dread politics holding him back, Baucus could, in theory, lead an effort to create the bipartisan tax overhaul that businesses in the US are crying out for.

But don’t count on it. US firms looking for an end to taxes on foreign income, lower corporate tax rates (the highest in the OECD) and other breaks are probably going to be hanging on for months, and perhaps years.

Baucus promised to dedicate his final year and a half in office on “simplifying and improving the tax code.” He wouldn’t be the first to promise one final push for the cause. Former Senate budget committee chair Kent Conrad pulled the same move in 2011, announcing that he would retire rather than stand for the next election, in order to focus on creating a grand budget bargain.

But the only result was an escalating series of fiscal stand-offs. And Baucus, like Conrad, is unlikely to be able to bring two deeply ideologically divided parties together just because he no longer needs to seek re-election. Both parties want a more efficient tax system, but whether reforms would be aimed at reducing the deficit, lowering tax rates, or some combination of the two, is not settled.

And even if such an agreement were in place, Baucus would be hard-pressed to conclude a deal. Insiders point out that without the promise of future favors, he will have little clout. His pragmatism (and relatively conservative constituents back in Montana) haven’t made him many friends in his own caucus, or among Republicans. “He will not be able to twist any arms,” a Senate staffer warns. Others note that Democrats believe that both of Baucus’ potential successors as finance committee chairman—Oregon’s Ron Wyden or New York’s Chuck Schumer—would be better negotiators with the opposing party, assuming that Democrats still hold the Senate after next year’s congressional election.

Then there’s the business of politics: Baucus’ former staff have made lucrative careers advising corporations and lobbying Congress thanks to their in-depth knowledge of the issues and members, and many expect his current staff to head for the private sector while their knowledge is still valuable. You try writing a tax law while you’re hiring an entirely new staff. Baucus, too, may head for K Street, home to the capital’s advisory firms.

But if today’s budget news is any indication, don’t count on agreement anytime soon. The two parties in Congress can’t even agree on whether or not the US budget should be considered in open hearings, which Republicans once demanded but now oppose, or through back-room negotiations that have failed, time and again, to produce a deal. See you in August, when the US is expected to hit its debt limit again.