Add It Up

02.18.14

The Senate’s New Taxman Won’t Be Controlled By His Own Party

Ron Wyden gets along with some Republicans better than Harry Reid or the White House. If Democrats let him work across the aisle, we may get the first tax reform in 30 years.

For two years, Senators Ron Wyden and Judd Gregg met almost every week to talk about taxes. The exuberant, indefatigable Democrat from Oregon and the dour, taciturn Republican from New Hampshire made an odd couple. But they shared a singular, nerdy passion for wanting to overhaul the tax code and their lengthy negotiations ultimately resulted in the Bipartisan Tax Fairness and Simplification Act they introduced in 2010.

Gregg, who left the Senate that same year, describes Wyden as “somebody who has relentless optimism.” There were many substantive disagreements between them along the way as they tried to hash out the details of the plan, and Gregg recalls, “On numerous occasions I gave up on the process but he (Wyden) would track me down on the floor or in an elevator and insist we keep at it.”

Their plan to simplify the tax code, reduce corporate and personal rates and eliminate many exemptions and write-offs didn’t have much chance of being enacted, but both men thought it was worth the effort. “We enjoyed it because it was so tough,” says Wyden.

“Something like that takes a long time, it’s like a cork floating to the surface of the ocean,” Gregg says.

That same year President Obama created the National Commission on Fiscal Responsibility and Reform co-chaired by former GOP Senator Alan Simpson and Clinton White House chief of staff Erskine Bowles to come up with a bipartisan “grand bargain” for tax and entitlement reform. The plan, though widely discussed, didn’t go very far either. But Gregg, a member of the commission who voted in favor of its final report, says a lot of its ideas came from his and Wyden’s tax plan and will be the basis for future discussions.

While a grand bargain is extremely unlikely, Wyden intends to keep pushing for piecemeal reform. After years as an earnest, wonky backbencher toiling on seemingly impossible legislative quests, Wyden as the new chairman of the Senate Finance Committee will now have a seat at the table when big decisions are made.

The Finance Committee is the most consequential and powerful committee in the Senate with far-reaching jurisdiction over tax, trade, and health care issues affecting every American, and it provides a huge platform for Wyden’s ideas along with the staff and resources to implement them.

“I’ve had these tax reform bills for a decade. We’ve put some sweat equity into this,” Wyden told me the day he formally took over the chairmanship just before the Senate adjourned for its President’s Day recess. “I come to play every day. I’m going to be looking for activist opportunities that have a strong bipartisan coalition behind them… This is the go-to place for tackling big things.”

Wyden is popular with GOP colleagues for his collegiality, work ethic and willingness to include their ideas in legislation. “At his core he is very liberal but he’s also willing to go across the aisle and be bipartisan which is what you have to do to get anything done and really govern,” asserts Gregg.

“He’s going to have a good friend in me,” says Hatch. “I think we’ll make a good team.”

But the Democratic leadership and White House have not always been fans. In pursuit of a goal, Wyden can go off message.

For example, Wyden’s work in 2011 with Republican House Budget Chairman Paul Ryan on a national Medicare reform plan that included a proposal to allow seniors to choose either existing Medicare or private insurance—an option already available to seniors in both Oregon and Wisconsin. The plan became a flashpoint during the 2012 presidential campaign when Ryan was selected as Mitt Romney’s running mate. Romney proudly pointed to Ryan’s bipartisan Medicare reform plan while Democrats blasted it as a plot to privatize Medicare, never mentioning Wyden’s involvement.

“I called him after I got picked (as vice presidential candidate) and told him I hope this doesn’t get you in too much trouble…and he laughed and said—‘Too late’”, Ryan said. “It took courage for him to do this with me.” Ryan still thinks their plan is “the best way to save Medicare,” but many Democrats won’t even entertain discussions about entitlement reform.

Wyden also had his own health care reform plan co-sponsored with Republican Robert Bennett of Utah. Bennett lost his Senate seat in 2010 as a result of a Tea Party challenge and due in no small part to his work with Wyden. Their plan would have guaranteed the availability of portable, private health insurance that would not be tied to employment and offer individual tax credits to help pay for it. Wyden, also up for reelection in 2010, was attacked by union-sponsored ads in Oregon over a provision in the plan that would have made so-called platinum health care plans taxable. But Wyden answered with his own ads and easily won reelection using the campaign slogan “Ron Wyden: Different. Like Oregon.”

Wyden says the Finance Committee will hold hearings this year on potential changes to the Affordable Care Act. “There are a number of things that can be done administratively” to make it work better, he explains.

Max Baucus, Wyden’s predecessor as Finance Chair, had a rocky—one Capitol Hill observer called it “toxic”—relationship with Senate Majority Leader Harry Reid and the rest of the Democratic leadership who felt he compromised too much with Republicans on legislation, went his own way without consulting them, and voted against his party too often. As a result, they shut Baucus out on health reform and signaled he wouldn’t be able to advance anything else he wanted to do. As one GOP senator described it, Democratic “leadership treated Baucus like dirt.”

Baucus had planned to retire at the end of 2014 but left the Senate last week after being tapped by Obama to be U.S. ambassador to China. The move allowed Montana’s Democratic governor Steve Bullock to appoint the state’s lieutenant governor John Walsh as Baucus’ replacement, giving him an incumbency advantage and the Democrats a greater chance of holding the seat in November.

It’s unclear how much more running room Reid will give Wyden but the Oregon Democrat is bound to be more politically deft and deferential in dealing with the party leaders than Baucus. Until he was officially confirmed as chairman by the Senate last week Wyden said very little, not wanting to antagonize the leadership or get too far out ahead of himself.

“He could have been dancing with glee but he was very restrained,” observes Orrin Hatch, the Finance Committee’s ranking Republican. “I think Ron will go slow at first and feel his way with the leadership but sooner or later there will come a time when he has to stand up.”

Wyden is not the type to poke his finger in Reid’s eye or go out of his way to highlight differences with the party line but he also isn’t overly concerned about toeing that line when he is trying to get something he considers important accomplished.

As a member of the Senate Intelligence Committee, Wyden has been one of the most outspoken opponents of dragnet intelligence gathering and domestic spying on American citizens by U.S. intelligence agencies and introduced legislation to ban the mass collection of phone and email records and reform the court that oversees the National Security Agency’s domestic surveillance.

When asked about his relationship with the majority leader, Wyden points to a picture in his office of Reid with one of his young children. The 64-year-old Wyden and his wife Nancy Bass Wyden, 52, had twins Ava and William in 2007 and a daughter Scarlett in 2012. Nancy runs downtown New York’s iconic Strand Book Store a family business started by her grandfather in 1927. The couple met in Portland, Oregon when she was visiting Powell’s, another of the nation’s most famous independent book stores and they married in 2005. Wyden also has two children from a previous marriage. Wyden and his wife have a bicoastal and tri-city marriage. Wyden has homes in Portland and Washington; Bass is based in New York with their children, which means a lot of traveling to spend time together. “She’s the wonder of the operation,” says Wyden of his wife and the juggling it takes to maintain their complicated life and schedule.

Wyden moved to Oregon to attend the University of Oregon Law School and founded an Oregon chapter of the senior advocacy group the Gray Panthers before being elected to the House in 1980, two years before Reid. Reid spent only four years on that side of the Capitol before his 1986 election to the Senate. Wyden won his Senate seat in a special election in January 1996.

“We’ve known each other since we both came to Washington,” Wyden says. “We talk all the time. Both of us are not long on formality. We recognize that you have to move quickly, not surprise people and give everyone a chance to be heard.”

Wyden, who had never headed a full committee until last year, gave up the chairmanship of the Energy Committee for the Finance post. He has only been on the Finance Committee since 2005. His swift ascent was made possible because half a dozen more senior Democrats were defeated, retired or took administration jobs over the past few years. Jay Rockefeller, Democrat of West Virginia, was next in line but is also retiring at the end of this year and passed on the job.

Reid may have preferred New York’s Chuck Schumer, a party stalwart and member of the leadership for the Finance chairmanship, but Senate tradition dictated the post go to Wyden because he was next in line. It’s been a hundred years since the Senate bypassed seniority in awarding a chairmanship, a fact researched in advance by Wyden’s staff. All Wyden will say about the matter is that Schumer and the Democratic caucus followed the seniority tradition.

Ben Cardin, a Maryland Democrat and member of the Finance Committee, says Wyden knows he is part of the leadership now. “I think Ron understands the difference between being a member and being chairman. What he does with partners on the other side of the aisle will need to be consistent with the (Democratic) caucus game plan.”

Republican Mike Crapo of Idaho, whose office is located next to Wyden’s in the Dirksen building, is also on the Finance Committee. Like Gregg, Crapo was a member of the Simpson-Bowles commission and supported its reform proposal. Crapo predicts that in pursuit of legislative success Wyden “will work his hardest to build consensus on the committee among both Republicans and Democrats and that may involve pushing the envelope with both parties including possibly his own leadership.”

Neither Reid nor Obama has signaled they want to make tax reform a priority and it won’t happen without their support. But Wyden says “I want to advance tax policy that gives everybody a chance to get ahead and helps the middle class—I think the Democrats will be interested in that.” 

It has been thirty years since there was a major overhaul of the tax code. The Tax Reform Act of 1986 was a joint effort among President Ronald Reagan, House Speaker Tip O’Neill, House Ways and Means Chairman Dan Rostenkowski, and Senate Finance Chair Robert Packwood, the man Wyden replaced in the Senate when Packwood resigned over sexual harassment and ethics charges. Another of its most important proponents was former Democratic Senator Bill Bradley.

Wyden and Bradley are both smart guys, socially liberal but fiscally centrist pragmatists who enjoy focusing on policy and don’t mind diverging from their party. Both men were basketball players although Wyden played only for his first two years at USC Santa Barbara before transferring to Stanford where he majored in political science. Bradley, a history major at Princeton, was an NBA hall of famer who played for the New York Knicks. “I don’t have as good a jump shot as him… I was too small and I made up for it by being slow,” quips the 6’4” Wyden.

Wyden says the two men have talked about tax reform and Bradley’s advice was to “keep pushing—you get it by pushing it.”

Wyden, who seems eager to follow that advice, says his goals for tax reform are “to clean out the junk” of write-offs and exclusions, make the code more progressive and lower rates except for capital gains which he thinks should be taxed more like regular income. But a big difference now compared with the ’86 effort Wyden explains is “they weren’t dealing with the social media… the first time some powerful interest isn’t getting what it wants they will take their message viral and claim Western civilization is going to end if this particular tax break is touched in any way.”

“It’s not going to be easy. Everybody and their dog has an issue in the tax code,” agrees Hatch.

Tax reform will also be harder this time around because the political climate is much more polarized than it was in 1986. There’s virtually no chance of it happening in this election year but Wyden and Hatch both think it could be possible in 2015.

Wyden plans to start by working on the extensions of more than 50 tax provisions that expired at the end of 2013 including deductions for state and local sales taxes, credits for research and development and renewable energy. Wyden says completing the tax credit extensions this year could be a bridge or “trampoline” to more comprehensive tax reform.

Hatch clearly is game to work with Wyden. “I have high hopes for him. He’s going to have a good friend in me,” says Hatch. “I think we’ll make a good team.”

Whether it will be Wyden or Hatch captaining that team depends on whether the Republicans win back control of the Senate in November. Another roster change that could have a big impact on tax reform in 2015 involves the House Ways and Means Committee. Paul Ryan, currently Budget chair, wants to replace David Camp who is losing the Ways and Means chairmanship at the end of this year because of GOP term limit rules.

Like Hatch, Ryan wants to work with Wyden on tax reform and says they have a lot in common. “We’re both policy guys with nice demeanors. He’s a liberal but he’s not an angry liberal—he’s a happy liberal.”

Josh Kardon, a lobbyist who served as Wyden’s chief of staff for 17 years, concurs. “Ron’s fundamentally a legislator, not fundamentally a message or a political guy.”

Wyden may prize being liked and getting along with his colleagues, but Kardon says the quality that could most define him as chairman is that “he’s a tough guy, something a lot of people are going to find out—he stands his ground.”