Earlier this week while sipping wine at the Milwaukee Public Market I sat next to policy wonk from a DC think tank. With the National Governors Association in Milwaukee, lobbyists from around the nation are in town. Predictably, our conversation soon turned to the economy and tax reform. Once again the talk of tax reform is in the air. Is it real this time?
I joined Maine’s state government in 1991. The state budget was in a crisis with layoffs, reduced workweeks and state bills simply not getting paid. There was talk everywhere of “tax reform.” The net result was a series of budget gimmicks but not tax reform.
Four years later I had the front row seat when I sworn in as Maine’s revenue commissioner (Executive Director of Maine Revenue Services). As part of the administration of newly elected independent Governor Angus King, we were right in the thick of politics, tax policy and the tax reform movement.
Because Maine had term limits, at any given time much of the state’s house and senate were composed of freshman legislators. That makes for many new and innovative ideas but term limits can be a double edged sword – lobbyists became the institutional memory of the legislature and blocked much well needed tax reform.
Budget crises breed talk of tax reform but usually with no result. California saw much the same thing in 2009 when the state resorted to paying employees with IOUs. More talk of tax reform but little results.
This year, the talk of tax reform is at the federal level. Senate Finance Committee Chairman Max Baucus (D. Montana) and House Ways & Means Committee Chairman Dave Camp (R. Michigan) appear to be quite serious about the task. Although both are very powerful leaders, no meaningful reform can come without the support of both parties and President Obama.
That there is even meaningful discussion of tax reforms has energized the lobbyists. Lobbyists play an important role in politics but they can also stop just about anything absent strong sentiment from the public and political leadership. Currently, the business community acknowledges the tax code is a broken mess but there has been little direction from Obama. (Despite claims from just about every former president, the last true tax reform cam in 1986 and that had very vocal support and leadership from Ronald Reagan.)
Talk of tax reform always produces something. Whether it will be true tax reform or just some cosmetic reshuffling remains to be seen. Given our global economy and other countries offering more favorable tax regimes makes it difficult to raise taxes although many people argue that tax reform means increasing business taxes and offering more individual relief.
The winners thus far appear to be the lobbyists. Unless the president expends some political capital and enters the fray, the lobbyists are likely the only winners.
Posted by Brian Mahany, Esq.
Brian Mahany is now a tax lawyer in private practice representing businesses and individuals. His firm, Mahany & Ertl, provides tax planning, foreign reporting, IRS audit defense and U.S. Tax Court appeals. They have represented businesses of every size from Fortune 150 to “mom & pops.” In addition to serving as Maine’s revenue commissioner, Brian also served as an officer of the Multistate Tax Commission and as a lobbyist for both nonprofit nursing homes and Helicopter EMS (LifeFlight). Brian can be reached at or by telephone at (414) 704-6731 (direct).