In the wake of the failed attempt by this Congress to repeal and replace the Affordable Care Act, the president and congressional leadership have signaled that the next big effort will be to reform the tax code.

And while Treasury Secretary Steve Mnuchin may say that tax reform is much easier, all evidence points to the contrary.

It’s been more than 30 years since the last major overhaul of the tax code. Almost all tax legislation in that period of time has either added loopholes and complications to the code or simply handed out tax breaks without any clear plan to make up the lost revenue save for the magic of economic growth. Meanwhile, the national debt has ballooned from $2.1 trillion to nearly $20 trillion.

Just as they tried to do with health care, congressional leadership is prepared, if not planning, to pass tax reform through a process called budget reconciliation.

Reconciliation is an occasionally used addendum to the annual budget process. As in any year (at least theoretically), the House and Senate each pass a budget resolution. Once these are passed, a concurrent budget resolution is negotiated and agreed to by both chambers, setting the overall discretionary spending limits for the upcoming fiscal year. The budget resolution may also include instructions to the authorizing committees that oversee the two-thirds of the federal budget that isn’t subject to annual appropriations (i.e. mandatory spending). These instructions direct each committee to devise certain direct spending or revenue changes for the government programs they oversee, or to adjust the debt limit. This is known as budget reconciliation. The reasons this is a particularly popular tool when there is one party in power are simple:

1. It’s enforceable. If the committees don’t do what they are told, the budget committee can ensure that changes happen on the floor.

2. A budget reconciliation bill can’t be filibustered. In fact, it only needs a simple majority to pass in the Senate.

3. Unlike a concurrent budget resolution, a budget reconciliation bill is sent to the president to be signed into law or vetoed.

But there are also some limitations to reconciliation – it can only be debt limit, direct spending or revenue-related – no policy changes allowed. And there can only be one of each type of changes (debt limit, spending and revenue) in a single reconciliation bill. Of the 24 bills that have passed both chambers of Congress through reconciliation since the process was created in 1974, only four have been vetoed by the president.


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And the biggest downside of budget reconciliation: It is a winner-take-all solution that alienates a huge portion of the country. Case in point: The Affordable Care Act, which was passed in part using reconciliation in 2010, when the Democrats held majorities in both chambers of Congress and the presidency. Across the political spectrum, there is agreement that some aspects of the law don’t work and some do. But it remains one of the central, polarizing issues of our time. The recent attempt to repeal the Affordable Care Act failed before it even had a chance to get to the Senate, in part, because by starting with a position that there was no need for bipartisan support, leadership stopped the conversation before it even started.

Tax reform through reconciliation may solve some problems in the tax code – it might even produce good reforms – but it would deepen the division that is eroding our democracy. And getting the job done without reconciliation is possible – remember, the 1986 reform passed the Senate by an overwhelming 97 to 3 margin. If the current congressional leadership makes no effort to make tax reform truly bipartisan, they will be ignoring the voices of half the country.

Bipartisan tax reform may seem like a pipe dream, but it is a dream worth pursuing.


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