"Economic Perspective" column reprinted with permission.
Copyright 2000 TAX ANALYSTS
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
No matter who wins the presidential election or which political party takes control of the House or the Senate, there will be a new chair of the House Ways and Means Committee. And while the Senate Finance Committee chair may not change, both committees are due for a thorough self-assessment. Some believe they must recover their past glory, others say they must evolve to meet the challenges of a new and different era. The truth lies somewhere in between.
Over the next few years, the committees will face some of the largest challenges of their existence. Tax simplification, I believe, will be forced on them one way or the other. One possibility is that the required reform of the alternative minimum tax, which is rapidly adding new taxpayers to its toll, will force attention to a larger simplification agenda. No matter what the catalyst, I remain convinced that dealing with tax complexity cannot forever be dodged.
A second large challenge is social security, whose reform will not only change the expenditures in that program but will set new precedents in a variety of budget and tax areas. Among other things, the budget deficit is liable to be redefined further to exclude some amounts of public saving, and mandates (taxes) to contribute to individual accounts, as proposed by both presidential candidates in one form or another, are likely to be adopted in some form or another.
Collateral reforms will be required in private pensions, and social security reform will finally force Congress to recognize how large a portion of the population goes into retirement without much in the way of private pensions. Medicare reform will necessarily put on the table new and different ways of financing and controlling those expenditures.
In addition to this "must-do" list, a lot of other issues could be tackled in part or whole over the next decade: the treatment of Internet commerce, depreciation of information age investments, new rules for international taxation, and further efforts at redefining welfare.
Barring some overwhelming victory by one political party or the other, almost all major pieces of legislation will require bipartisan agreement to move forward. Although the two major parties may differ considerably on what they would like to achieve, in point of fact, there is much that simply has to be done for which neither party may want to claim credit. In many of those areas, "fixing" the system means creating losers so that greater equity and efficiency can be attained, and no politician likes to claim sole or even primary responsibility for creating losers.
The current presidential and congressional campaigns are doing everything they can to avoid addressing these major issues in any detail. These are complex agendas that are not summarized easily in sound bites. The candidates mainly fight over what tax cuts and expenditure increases they are going to "give" us, not how they are going to create viable and workable systems.
Traditionally, it has been the very complexity of such financing issues that has been the source of the strength of the taxwriting committees. Sure, they also wrote tax bills every year that were simple or simplistic or both, but when it came time to recodify the tax system, or to get the budget in better order, or create a new system of employee retirement security, or restore balance to the social security trust funds, the committees traditionally were able to come through.
Often, other sources of congressional power—other committees, the Speaker's office or the Senate Majority Leader's office—simply did not have the necessary knowledge and ability to deal with the issues under the jurisdiction of a taxwriting committee. Sometimes the leaders of the House and Senate were glad to turn over responsibility, especially when tough choices were required. At other times they did so only reluctantly, and the committees acted independently using their own power base.
Charles Rangel of New York, the ranking minority member of the Ways and Means Committee, alluded to this powerful past in an interview at the Democratic Convention with Ryan J. Donmoyer of Tax Notes magazine (see Tax Notes, Aug. 21, 2000, p. 969). But he also pledged to run the committee, should he be its next chairman, in a more bipartisan fashion, alluding, also, to the committee's history and necessity of working together.
One source of cooperation in the taxwriting committees might be viewed with some skepticism: when it comes to major tax legislation, it has often been the practice to use logrolling within the committees, but not outside them. That is, each member is often given something he or she wants as the price for a vote for an overall bill.
But while the self-interest of the committees' members in working together is a partial explanation of the effective committees of the past, it is not all. Robert Reischauer, a former director of Congressional Budget Office and currently president of the Urban Institute, notes how former Ways and Means Chair Dan Rostenkowski used "retreats" as a way to bring members together, to make them think that they were something "special." That sense of being different was not just a matter of power, it involved acceptance of a higher level of responsibility as well.
It would be a mistake to think that the taxwriting committees can simply move back to the past. Each period has unique problems and possibilities. When the Republicans took over the House in 1994, they wanted somehow to move an agenda they had set forth in the campaign. Newt Gingrich's consolidation of power in the Speaker's office has since created a number of problems for the Ways and Means Committee, as has some of the consolidation of power in the office of the Senate Majority Leader created problems for the Finance Committee.
But if we look beyond political party and personality, there are certain features of the modern policymaking landscape that are requiring a new type of legislation.
In particular, the federal government has largely become a government of transfers and taxes. When it largely was concerned with defense or energy or financing the expansion of the frontier, it was easier to separate out most tax functions from the activities they financed. No longer.
The simultaneous consideration of who gets and who pays at times requires a consolidation of thinking and a consolidation of power. From the late 1970s to the early 1990s, that power was largely placed in the taxwriting committees, especially when it came time to cut back or make someone pay to get the deficit in order. There was nary a major piece of legislation—tax, budget, or expenditure—that did not involve the taxwriting committees as major, if not primary, players. In many ways, they had become more powerful than ever. It is not surprising that others, including those in the majority party's leadership, would want some of that power. And it was not surprising that a party out of power in Congress for so long would look to consolidate it in a new way. Resolving these power sharing conflicts will be part of the job of the committees' chairs in coming years. Other parts of the leadership in Congress still lack the technical ability to deal with difficult systematic problems in tax and other laws, but they are not going to turn over almost all the tax and expenditure responsibilities back to the taxwriting committees, no matter who is in charge.
With all the emphasis on last-minute budget deals, moreover, a lot of compromise cannot help but take place outside the committee structure. And with both parties competing over how many social expenditures they can put in the tax code, the rest of Congress is not going to so easily accede to the predilections of the taxwriting committees.
The next chairs of the taxwriting committees are going to have to come to grips with these conflicts as they redefine the roles of their committees for the new century. And soon cannot be early enough. The major issues they are going to be forced to address cannot be put on hold forever. In fact, being forced to address those issues may force some members of the committees to accept responsibilities they would just as soon, but cannot, avoid.