House GOP likely to include tax reform proposal in fight for a debt limit bill -- just delaying tough budget choices?

As a potential government shutdown approaches, House Republicans consider adding a framework for tax reform to legislation needed to increase the federal government’s borrowing authority. Gleckman explores what a GOP tax reform proposal could like, arguing it counterproductive. 

J. Scott Applewhite/AP Photo
Storm clouds hang over Capitol Hill in Washington, Friday, Sept. 27, 2013. As a potential government shut down approaches, Republicans consider adding tax reform amendment to debt extension proposal.

House Republicans reportedly are considering several ways to add a framework for tax reform to legislation needed to increase the federal government’s borrowing authority. Could such a rider increase the chances of reform happening in the near future? Sadly, no. Indeed, it is likely to bury a tax code rewrite even more deeply in Washington’s partisan muck.

The GOP leadership remains unsure about what this amendment would look like, to say nothing of what they’d finally accept once the bill works its way through the legislative meat grinder. But it seems pretty clear that adding tax reform to their debt limit wish list is little more than a talking point. And real reform would remain as elusive as ever, if not more so.

Keep in mind that the House GOP is not going to include an actual tax reform plan in its version of the debt bill. They are, in fact, far from agreeing among themselves on what such a proposal would look like. But they could try to tie an outline of their tax reform goals, and perhaps a timetable for reform, to a debt limit extension. 

The tax reform amendment would likely be one of many ideas the GOP would add to their version of a debt limit extension, which Treasury estimates must be passed no later than Oct. 17. Other possible GOP asks include a delay in the Affordable Care Act, permitting the Keystone pipeline, and rolling back a raft of environmental regulations as well as part of the Dodd-Frank financial reform law. The National Review Online published one version last evening.

When it comes to tax reform, Republicans seem to be looking at a couple of alternatives. The package leaked to National Review would demand congressional approval of a framework akin to the reform plan offered by House Budget Committee Chair Paul Ryan (R-WI). His proposal contains deep cuts in individual and corporate rates and unspecified curbs in tax preferences.

But would the GOP amendment include anything more than platitudes about rate cuts and loophole closers? That’s hard to say. One thing is certain: If it gets any more specific than that, count on Democrats to rip the GOP for wanting to scale back popular tax preferences such as the deductions for mortgage interest and charitable gifts, and the exclusion for employer-sponsored health insurance.

This would attract attention to the Republican’s interest in tax reform, but not in a good way.

The second piece of their package might be some sort of timetable for a tax code rewrite. The National Review story included some form of undefined “fast-track” authority for reform.

Last spring, some GOP leaders talked about tying progress on tax reform to a series of short-term debt limit extensions. In other words, the debt limit might be increased for, say, three months. Once the Ways & Means Committee reported out a revenue code rewrite, the debt limit would be increased for another three months. When the Finance Committee passed its version, the feds could borrow for another 90 days, and so on.

This is, of course, why including such a wish list on a must-pass debt bill would be so counterproductive. There are Democrats, including Senate Finance Committee Chair Max Baucus (D-MT), who would dearly love to do tax reform. But even the often-independent Baucus won’t buck his caucus by agreeing to a framework for reform with a legislative gun to his head. Especially one that raises no more revenue than the current tax code—a non-starter for the Democratic leadership.

Even some White House aides might like to see a timetable for corporate tax reform. But there is little chance President Obama would swallow anything like what the GOP is cooking.

Last month, I wrote that Washington’s never-ending fiscal crises have become a convenient excuse for lawmakers of both parties to avoid making tough budget choices. Instead of cutting entitlement spending or reforming the tax code, they distract their partisans with mud-wrestling with dead-end rhetoric. I fear that this latest tax reform gambit is yet another bit of political sleight of hand masquerading as serious fiscal policy.

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