Tax Reform Should Not Happen Behind Closed Doors
by Nick Schwellenbach, 7/29/2013
Senate Finance Committee Chairman Max Baucus (D-MT) and Ranking Member Orrin Hatch (R-UT) pledged to their colleagues in the Senate earlier this month that their tax reform proposals—namely on tax breaks and loopholes, both of great concern to corporate interests—would be kept secret for 50 years. In contrast, presidential records become accessible to the public after 12 years with certain exceptions.
The backdrop to all of this is Baucus and Hatch are aiming for major changes to the tax code, perhaps on par with those of the Tax Reform Act of 1986, known as “the biggest tax code overhaul in the nation's history.” Bruce Bartlett, a former domestic policy advisor to President Reagan, has argued in a recent book, echoing many other experts, that since the 1986 overhaul, "loopholes, exemptions, credits, and deductions have distorted [the tax system's] clarity, increased its inequity, and frustrated our ability to govern ourselves." Tax reform, if successful, could undo these distortions. But there is also the risk that tax reform could preserve or create new problems. At a minimum, the disinfecting power of transparency could put a stop to bad proposals.
To justify the secrecy policy, an aide to the Senate Finance Committee told The Hill newspaper that the secrecy is “standard operating procedure for sensitive materials, including investigation materials.” However, investigation materials often involve information that could reveal private information about individuals or companies – not proposed policy changes that could broadly affect all of us.
The secrecy guarantee, argues The Hill, "illustrates the enormous pressure being brought to bear by K Street lobbyists, who are working furiously to protect their clients and the tax provisions that benefit them." Secrecy will feed into deep skepticism that Congress's tax reform efforts will be driven by behind-closed-door corporate influence over the legislative process.
One year after the 1986 tax overhaul, a book called Showdown at Gucci Gulch was published that detailed the internal negotiations and politics that led to those reforms. With Baucus and Hatch’s secrecy policy, a similar history of tax negotiation happening right now might take far longer to be written. As the Center for Effective Government and 29 other organizations stated in a letter, organized by Taxpayers for Common Sense, to Baucus and Hatch, “If your comprehensive tax reform efforts are successful, your secrecy policy would delay that history from being written for 50 years.”
But this secrecy is not a given. Proposals on tax policy do not need to be hidden from the public.
Two senators have rejected secrecy and on their own have put their comments to the Senate Finance Committee online.
“Given the fact that my suggestions represent the interests of the middle class of this country and not powerful corporate special interests, I have no problem with making them public,” stated Sen. Bernie Sanders (I-VT; Sanders is an independent who caucuses with the Democratic Party). Sanders’ proposals can be found online here, here, and here.
Similarly, Sen. Jeff Flake (R-AZ) wrote in a letter – containing his thoughts on reform proposals – to Baucus and Hatch that “the process for reforming our tax system will benefit from a full and open legislative process under regular order that invites future public and congressional input.”
The Center for Effective Government believes democracy is not served when policies are negotiated in secret and citizens are not allowed to know the positions of their representatives on such critical issues as tax reform, tax breaks, and loopholes. Baucus and Hatch should reverse course on their secrecy policy and other senators should join with Sanders and Flake in their bipartisan call for more transparency.
Update [5:35 p.m.]: Earlier today, National Journal magazine reported on the some of the proposals being floated behind the scenes. For instance, "The real-estate industry, represented by the National Association of Realtors, wants two temporary tax credits made permanent, even though the existing mortgage-interest deduction already is one of the costliest tax breaks on the books."