Wyden gets second chance to reshape taxes and related issues
Ron Wyden has laid out a far-reaching to-do list as he takes charge of one of the most important committees in the U.S. Senate starting this week.
As the incoming chairman of the Finance Committee, the Oregon Democrat discussed not only immediate aid for families and workers — proposals that dovetail with those offered by incoming President Joe Biden — but also sweeping changes in the federal tax code, energy, health care, infrastructure and more.
His agenda is not secret. Wyden has talked about all these issues during town hall meetings the past four years. Until the onset of the coronavirus pandemic 10 months ago, Wyden conducted such forums in person in each of Oregon's 36 counties, as he has since he was elected 25 years ago. He had a virtual town hall Sunday in Washington County.
The Finance Committee covers more than just taxes. Among the other issues within its domain are Medicare, Medicaid and the Children's Health Insurance Program, the three big federal health insurance programs; Social Security, Temporary Assistance for Needy Families and trade legislation. Unemployment is included because states levy payroll taxes, but the federal government oversees the benefits paid out.
"The Finance Committee is at the center of all of these issues," Wyden said during a conference call with reporters last week.
"One of the lessons you learn as a legislator is that when you have an opportunity, you use it."
Wyden joined the Finance Committee in 2005. He also is on the Energy and Natural Resources Committee, which he led in 2013.
He is the first Oregon senator to lead a major Senate committee since … Ron Wyden. He led the same committee for 11 months in 2014, after Montana's Max Baucus resigned to become U.S. ambassador to China, but before Republicans won a majority in the Senate.
As the committee's top Democrat, Wyden has had close relationships with Republican chairmen Orrin Hatch of Utah, and after Hatch retired in 2019, Charles Grassley of Iowa. But Wyden was a prominent dissenter in Republican efforts to repeal the Affordable Care Act and pass the largest tax cut in history. He helped turn back repeal, but lost on the tax cut.
He takes over as Democrats this week gain tenuous control of the Senate. Vice President Kamala Harris holds the tie-breaker in a chamber split 50-50.
Wyden, 71, plans to seek another six-year term in the Senate next year.
Below are comments Wyden offered on some key issues.
Wyden was a critic of the 2017 tax overhaul, which will cost the U.S. Treasury a projected $1.8 trillion over a decade, and passed without a single Democratic vote. The law cut taxes for many people, but higher-income households and large corporations benefited more.
Among the changes he will push for:
• Ending the tax breaks for capital gains, which are profits from the sale of an asset such as stock held for at least one year. Tax rates are up to 20%, depending on the size of the gains, a person's tax bracket, and how long a person holds the asset. (Oregon does not give special treatment to capital gains, which are subject to the highest income-tax rate of 9.9%.) He also proposes to tax capital gains annually, even if they are not realized yet.
These changes would apply only to the top .3% of earners, if they get at least $1 million from capital gains annually or have $10 million in assets for three straight years. Exemptions would apply for farms, homes and retirement savings.
"If you are a nurse taking care of COVID patients, you do not get to defer paying your taxes," he said. "If you are a billionaire, you can defer and defer some more and pretty much never pay any taxes at all. My plan would put a stop to that."
• Increasing the top corporate tax rate, which the 2017 law cut from 35% to 21%, and steering more breaks to small businesses, particularly those owned by women and racial and ethnic minorities. "We want to ensure that small-business deductions really get to main-street entrepreneurs, rather than millionaires."
• Increasing the earned-income tax credit, one of the few breaks available to low-income households. (Oregon's similar tax credit is 9% of the federal credit, 12% for children 3 and under.) Also, making the child tax credit fully refundable so that households that owe no taxes still get money back, and expanding the tax credit for child and dependent care. Credits are subtracted directly from taxes owed. Biden has offered similar proposals.
The issue is not officially within the realm of the Finance Committee. But Wyden said the federal tax code has 44 energy-related tax breaks, including the much-debated oil and gas depletion allowance, which dates back to the start of the modern federal income tax in 1913.
He wants to reduce those tax breaks to three: One for development of renewable energy sources, one for promotion of energy efficiency such as weatherization, and one for transportation fuels. According to the U.S. Energy Information Administration, that sector accounted for 28% of all energy use in 2019, and 92% of those fuels are petroleum products — gasoline the largest share, followed by diesel and jet fuel.
In addition, Wyden wants to use the tax code to discourage pollution, although he did not specify whether a carbon tax or a cap-and-trade system would be considered. The House passed a version in 2019, but it died in the Senate in 2010.
"The window to avert the worst climate catastrophe is closing," Wyden said.
As part of the $787 billion economic stimulus that Congress passed in 2009 during the Great Recession, Wyden was able to secure Build America Bonds, which offered federal tax subsidies for the issuing state and local agencies or credits for the bond buyers themselves, lowering the interest rates. They resulted in $181 billion for projects, some of them in Oregon, in 2009 and 2010.
Trump talked about promoting funding for public works during his 2016 campaign.
"It should have been Donald Trump's first bill as president," Wyden said. "But it was a real missed opportunity. A lot of senators want to address this."
A year after he took office in 2017, Trump proposed $200 billion from the federal government — some of it moved from other programs — and $1.5 trillion from the private sector for projects likely to result in tolls on publicly owned roads and bridges. His plan went nowhere.
Biden is scheduled to propose his own plan this week.
Wyden said the committee will look at changes to the Affordable Care Act, the health-care law signed by President Barack Obama in 2010 but a repeated target of Trump and Republican congressional majorities. Repeal efforts passed the House, but died three times in the Senate.
"The act has been resilient even in the face of Trump's efforts to undermine it," Wyden said. "Now we are going to be looking at common-sense improvements of lower premiums."
Sweeping changes, such as a Medicare-for-all plan championed by progressive Democrats, are unlikely immediately given Democrats' tenuous majority in the Senate.
According to the Centers for Medicare and Medicaid Services, the nation spent $3.8 trillion on health care in 2019, about 17.7% of the gross domestic product. Wyden said that amounts to more than $40,000 for a family of four.
"We can do a lot more to make sure health care is affordable and accessible for the amount of money we are spending," he said. "It starts with cost containment."
Wyden said he endorses House efforts to restore the federal government's ability to negotiate prices with drug makers. The government accounts for just under a third of all health-care spending in 2019, and Medicare — which covers people 65 and older and some people with disabilities — is the largest single program. It also pays two-thirds of Medicaid; the states pay the rest to cover low-income people.
Wyden also said he will renew his push to curb rising prescription-drug prices. He did not say whether he will revive his proposal with Republican Charles Grassley to cap costs. The bill passed the Finance Committee, but opposition from drug makers and outgoing Majority Leader Mitch McConnell stalled it. The Congressional Budget Office estimated that the Wyden-Grassley bill would save $95 billion over the next decade.
Wyden also said he would continue his push to root out disparities in health care for racial and ethnic minorities, and to look into why the coronavirus pandemic has claimed more than 100,000 lives in nursing homes and other senior congregate living settings. The latter figure is imprecise because of how states report those deaths.
Packwood: Chairman has clout, but bipartisanship is key
Bob Packwood knows what Ron Wyden faces as he takes over leadership of the U.S. Senate's tax-writing committee this week.
Republican Packwood was on the Finance Committee for 22 of his 27 years in the Senate — his resignation under pressure in late 1995 cleared the way for Democrat Wyden to win the seat in 1996 — and led it in 1985 and 1986, and again in 1995.
Wyden has laid out a far-reaching to-do list.
"As chairman, you can organize things as you want," Packwood, now 88 and living in Portland, said in an interview with the Portland Tribune.
Packwood and Wyden had an encounter at a dry cleaners just after Wyden took his seat on the committee about 15 years ago.
"He will have good ideas. The problem will be if it is a straight partisan vote," Packwood said. "Any chairman has muscle. But the great advantage I had in my era was bipartisanship."
Packwood contrasted his 1985-86 tenure, when Congress passed a historic overhaul of the federal tax code, with the 2017 overhaul.
The 1986 law, the most significant second-term domestic achievement of President Ronald Reagan, passed with bipartisan majorities — and it neither increased nor decreased federal tax collections. The 2017 bill, which President Donald Trump signed, passed only with Republican votes — and it is projected to cost the U.S. Treasury $1.8 trillion over a decade.
Packwood joined the committee in 1973, two years before the end of his first Senate term. By 1979, he was the Republican behind Bob Dole of Kansas, who became chairman in 1981 after Republicans won the Senate for the first time in 25 years. Packwood became chairman after Dole became Senate majority leader.
Unlike Wyden, who has specified multiple priorities, Packwood said he knew his committee would focus on the tax code overhaul. Reagan's Treasury Department had drafted a bill in late 1984 — Treasury Secretary James Baker, White House chief of staff in Reagan's first term, was Reagan's chief negotiator for it — and the Democratic-controlled House passed a version in late 1985 with some Republican votes rounded up by Reagan.
"Everybody knew about the concept of a tax reform bill, which finally got passed," Packwood said. "Did I know about that on Jan. 1? Yes. But did I have any idea of a bill? No."
The effort almost fell apart in the Senate, until Packwood and his top committee staffer came up with an alternative over what is known now as the "two-pitcher lunch" at a Washington, D.C., bar. Packwood then turned to a group of six, who met secretly in his office for six straight mornings to hash out the details. He said he cannot recall any party-line votes.
The group consisted of Democrats Bill Bradley of New Jersey, who had offered his own plan, George Mitchell of Maine and Daniel Patrick Moynihan of New York, and Republicans John Chafee of Rhode Island, John Danforth of Missouri and Malcolm Wallop of Wyoming.
"If we could reach an agreement, I knew we would have no problem passing it in committee," Packwood said.
In modified form, the full committee passed it 20-0, and the Senate 97-3. After the House and Senate resolved differences, Reagan signed it in October 1986. It effectively reduced the number of income tax brackets from 14 to two, lowered the overall rates, reduced the top corporate tax from 48% to 33%, raised about $150 billion in business taxes to allow for the lower rates — and removed 6 million low-income people from the tax rolls.
Packwood retold much of this story during a 2017 interview with Pamplin Media Group. Packwood, Baker, and the House Ways and Means Committee chairman also spoke at length for the 1987 book "Showdown at Gucci Gulch," written by two Wall Street Journal reporters.
"The reason we could put a coalition together was that Democrats wanted to close loopholes, Republicans wanted lower rates," Packwood said in 2017. "It was a natural marriage if we could pull it off."
While the tax overhaul dominated Packwood's 1985-86 tenure as committee chairman, he said it was never the only thing he had to worry about.
The same week the tax overhaul came up before the full committee, Packwood recalled a dispute that threatened to derail an effort by President Reagan, who sought to negotiate a trade agreement with Canada. Reagan could do so under fast-track authority unless either the House or Senate blocked him.
While the House let Reagan proceed, Packwood said his committee came within one vote of blocking Reagan because of unrelated objections from three senators who could muster 10 of the committee's 20 members.
Packwood said Missouri's John Danforth had a complaint about shoe imports, Colorado's Bill Armstrong sought an investigation into slave labor, and Hawaii's Spark Matsunaga was unhappy that Reagan hadn't responded to a letter about macadamia nuts.
Packwood said he let them put forth the motion to block the president's authority.
As chairman, he said, "I called for the votes and I knew they didn't have them."
NOTE: Corrects some typos in the Packwood story.
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