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

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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.

Ron Wyden. Click image to expand.
Sen. Ron Wyden

Ron Wyden, the Democratic senior senator from Oregon, was never good at staying on message when he talked about health care. He had his own bipartisan reform bill, with Sen. Robert Bennett of Utah, and was always full of sideways thoughts and amendments to the bill the White House wanted. So White House senior adviser David Axelrod called him to go over talking points.

David Weigel David Weigel

David Weigel is a reporter for Bloomberg Politics

Wyden listened, then made a suggestion: The White House should consider ditching this whole health care issue and talking about tax reform instead. His reasoning was simple: Some people were happy with their current health care. But no one was happy with their current tax forms. Wyden had been introducing tax reforms for years, all aimed at flattening tax rates and simplifying business taxes. Then-Rep. Rahm Emanuel had sponsored one version of his tax reform in the House.

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Axelrod took this in. But he also pointed out to Wyden that the Obama administration had secured a massive middle class tax cut. Tax cuts made up one-third of the cost of the 2009 economic stimulus package.

Wyden had an answer for that. Nobody knew that their taxes had been cut. The stimulus tax breaks were, for political purposes, invisible.

"There was a loooooong pause after I said that," Wyden says.

Wyden is recounting all of this as part of a media blitz for, yes, his tax reform plan. He's been pitching the legislation he co-sponsored with Sen. Judd Gregg of New Hampshire since February, when they rolled it out and explained that the White House was amenable to it. The legislation creates three marginal tax rates of 15 percent, 25 percent, and 35 percent, creates a low 24 percent corporate income tax, eliminates the Alternative Minimum Tax, and simplifies the basic tax form. "Dick Gephardt was convinced that complexity is an even bigger issue than rates," says Wyden.

The bill was introduced when health care looked dead, and it was submerged in the ensuing frenzy over that bill's passage. But since Election Day, it's had a bit of a comeback. It was praised by Sen. Kent Conrad, chairman of the budget committee, who's been on a tear about the deficit. It was name-checked in the draft report of the Bowles-Simpson Deficit Commission, which quickly turned Wyden into one of the few Democrats willing to say kind things about what that commission could do.

"The rest of 2010," Wyden says, "and the first six months of 2011—six, eight months of 2011—are really key."

Wyden's best shot is for elite opinion to circle around the findings of the deficit commission, for the president take up his cause as a political tactic, and for Republicans in the House to see benefits for themselves in a somewhat flattened tax system. These are giant-sized "ifs." He has become the Senate's master at proposing bipartisan bills that win encomiums from editorial boards, collect a few co-sponsors, and are politely filed away. That's what happened with his health care bill with Bennett, and that's what happened so far on his tax-reform bill.

"One day, the Wall Street Journal had a couple of op-eds, one of them I wrote," says Wyden. "You say to yourself, ohhhh, everybody in America is going to be talking about it." He rolls his eyes. "Who talks about it? Nobody. I write op-eds, and people say, 'Ah, he's a nice guy.' "

As he talks, Wyden leans back in his office's large sofa and shifts his weight. He puts his legs up on a table, then takes them off, leans on a chair, and rocks it back and forth. There is nothing particularly original about pointing out that Wyden is awkward, wonky, and optimistic to the point of delusion about the strength of his ideas. He's well aware of the fact that if it's left up to him, tax reform won't go anywhere. The president needs to come on board, he says, because that's the only way taxes ever get reformed—sustained attention from the president.

"George Bush essentially took his presidency and early on, before 9/11, said his mandate was all about cutting taxes," says Wyden. "And early on he got a group, Republicans and Democrats, to help him. Taxes really lend themselves to the presidential bully pulpit!"

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.

"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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