Ron Wyden believes his perennial tax reform legislation has a chance.

Who's winning, who's losing, and why.
Nov. 17 2010 2:16 PM

Ron Wyden, D-Utopia

This time, the senator from Oregon says, his tax reform plan really has a chance.

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By contrast, Barack Obama has ceded the tax debate to Republicans since before he was elected. "Ever since Dukakis," he says, "there was already a sense that we were on the defensive, and we had to come up with a line, and the line was: 98 percent of people won't pay anything. " It worked in 2008, he says, but it gave Democrats no room to debate the GOP on taxes. "We've now gone through a campaign where we used the 98 percent line, and the other side won!"

When the Democrats were riding higher, there wasn't really an incentive for them to listen to Wyden. They could push through more progressive legislation than he was proposing. That's not the case anymore. Sensing this, Wyden frames his arguments as acknowledgments of what his party did wrong, such as the selling of the stimulus as a fix-all for the economy.

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"It was a mistake," he says. "This [tax reform] clearly had a better link to job creation in the private sector then where we ended up, with the sense that $800 billion was a lot of government spending. We didn't get growth in the private sector. Even now, people are talking about how you're going to stimulate the economy. You do a tax reform bill now and you put a lot of money into the pockets of middle class people without increasing the deficit."

Wyden has a few other tricks meant to make the bill less pie-in-the-sky and more attractive to political hacks. When he talks about tax deductions, he calls them "tax earmarks," a neologism he hopes can catch on quickly and convince resurgent conservatives that they should sign up with him.

This might be his best shot at avoiding the fate of all Wyden initiatives—mild bipartisan interest followed by demagoguery. In 2008, his health care bill was a sensible solution beloved by editorial pages. In 2009, it was what Republicans suggested, too late to make a difference, as a replacement for the Affordable Care Act. In 2010, it was a bludgeon conservatives used to oust Bennett, the co-sponsor. How does a new tax reform, reviewed pretty kindly by libertarian and conservative think tanks like Cato and Heritage, avoid being branded as yet another liberal plot to redistribute wealth?

Part of the strategy is convincing Republicans that this reform can improve on the bipartisan tax reform of 1986, which no one criticizes now. "Ronald Reagan is a revered figure in the Tea Party," says Wyden. "When you mention Ronald Reagan got together with people like Dick Gephardt … Well, it's not the end of the conversation, but it starts a conversation. Remember, a lot of the new members are already out in favor of a flat tax. Dave Camp, the new chairman of the ways and means committee, who's a Republican, has already been quoted saying he liked the Reagan approach of the '80s."

The 1986 example is Wyden's answer to the people who assume he's crafted the latest of his doomed compromises. He's talked to Camp, although he won't characterize the conversation.

"By the way, guys, we've done this before!" He waves an imaginary flag at an imaginary and very slow-moving bull. "Yooooo-hoooo! You know? This is where it's fundamentally different than health care—first time in 100 years, huge struggle. You can say we already did it, and here were the results: 16 million jobs created after the 1986 reforms!"

Wyden has to wrap up the conversation. He has more meetings. After that, he has dinner with Erskine Bowles.

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