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Remembering the 1986 tax reform

I've been reading Eric Patashnik's “Reforms at Risk,” which looks at how major legislation fares in the months and years after its passage. His section on the 1986 tax reform, which most people remember as a rare moment of bipartisan governance resulting in a major step forward for American public policy, is interesting. Keep in mind that the three attacks lobbed against health-care reform was that the process wasn't transparent enough, there were too many seedy deals and it was unpopular at the time of passage. First, on what happens when you make the system more transparent by opening the congressional process to the few individuals interested in watching it:

Mills [Chairman of the House Ways and Means Committee] was thrown from power in 1974 after a sex scandal, and Watergate-era congressional reforms weakened the power of subsequent chairmen. The effect was to open the tax writing system to broader public participation and political influences. The immediate winners from these changes were lobbyists, who found it easier to obtain special tax benefits for their clients.

Next, on deals:

Coalition leaders strategically used side-payments to lubricate the package's adoption. The bill included almost 700 so-called "transition rules" to exempt specific taxpaying entities, such as General Motors, Pan Am, and the University of Delaware, from the general provisions of reform. The stated objective was to ease the adjustment to the new tax system. The real purpose was to offer fence-sitting members some particularistic benefits for which they could claim credit with companies and organizations in their district.

And finally, on popularity:

Policy elites applauded wildly when tax reform passed in 1986, but ordinary citizens greeted the reform with indifference. A Gallup poll taken on the eve of the measure's adoption found that less than one-in-three respondents expected it to improve the nation's economy, make the tax system less complicated, or promote a fairer distribution of the tax burden.

The more things change, the more they stay the same.

By Ezra Klein  |  June 29, 2010; 11:36 AM ET
Categories:  Taxes  
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Good GOD, man.

You don't "fix" the problem of lobbyist influence by simply holding the process in secret back-rooms with unseamly private deals.

You should know that there is a price to be paid for democracy.

Posted by: WrongfulDeath | June 29, 2010 11:46 AM | Report abuse

The grand compromise raised the payroll tax, but didn't make the payroll tax more progressive. I am not sure a 1986 style compromise will do much for average americans who will get screwed while powerful special interests and the oligarchs and wall st moguls include provisions to keep the tax burden off them, just like last time.

Posted by: srw3 | June 29, 2010 11:59 AM | Report abuse

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