Showdown at Gucci Gulch: Lawmakers, Lobbyists, and the Unlikely Triumph of Tax Reform

by Jeffrey Birnbaum, Alan Murray

The Tax Reform Act of 1986 was the single most sweeping change in the history of America's income tax. It was also the best political and economic story of its time. Here, in the anecdotal style of The Making of the President, two Wall Street Journal reporters provide the first complete picture of how this tax revolution went from an improbable dream to a widely hailed reality.

Genres: Politics, History, Nonfiction, Economics, Taxation, American History, School

333 pages, Paperback

First published January 1, 1987

Reviews

[Matt · Rating 4 out of 5]

I dusted off this 30 year-old book in part to commemorate the recent news that the Republican Congress is setting out to tackle tax reform. Showdown at Gucci Gulch, the story of a successful 1986 tax reform bill, was essential reading for a generation of undergraduate political science students in the 90s who might be interested in how the American political system works. Your one-paragraph spoiler:

Reform was… achieved because it combined goals that were important to both political parties. Ending loopholes for the privileged had long been the desire of some Democrats. But the 1980s also saw the emergence of a new wing of the Republican party … passionately committed to lowering tax rates. These activist-conservatives had no deep interest in closing loopholes, but if that was the only way to pay for lower rates, they were willing to go along. By combining with the older Democratic reformers, they created an impressive bipartisan coalition.

For anyone under 30, the phrase "bipartisan coalition" means major political parties working together. It's something that used to happen. All the triumphs of the Reagan years were accomplished with Knute Rockne staring down a Democratic-majority House. And this tax bill was the major domestic accomplishment of his second term. But it's a primarily congressional story, not a Reagan one. (In fact, the Treasury department gets a lot more ink than Reagan.) It's not shy about making the story about people like House Ways & Means chair Dan Rostenkowski:

Rostenkowski's methods were rooted in something that transcended traditional explanations of legislative success, such as seniority or leadership position or political quid pro quos. The methods were wrapped up in the man himself. There were times when a Rostenkowski bear hug or a cold-edged glare was enough to change votes and move legislation. Congress is not a bureaucracy that moves by rote and form letter; it is a place where one person can make a difference and often does.

But where the book shines is in that it weaves the important procedural aspects into the story with great detail, like conference committee makeup & procedures. There's the mundane stuff about how rules are drawn up for how decisions can be made in principle. But then there's also the wiggle room within those broader guidelines. When should amendments be allowed, and why? How much power is centered in committees and with chairs of committees? When is that power limited? When can legislators vote without going on record? How might votes get swapped in horse-trading agreements? A good grasp of these details requires the reader to pay close attention but this stuff is all over the book. And not all of it is dry. Consider this passage:

Those on the committee who had battled against the chairman tooth and nail, like Sam Gibbons, had reason to fear they might be the subject of the chairman's revenge in the final bill. Representative Harold Ford of Tennessee, who had frequently opposed the chairman, commented to other members during a weekend session, "Boy, am I in a lot of shit with the chairman right now," Representative Charles Rangel, who overheard the comment, shot back, "If you're in shit, you're standing on Sam Gibbons's shoulders."

In short, the major players got their compromise. It's not all sunshine and roses. The major players are all champions of various lobbies and PAC money is mentioned more than once. In fact, the two biggest congressional figures in the story, Bob Packwood and Rostenkowski, saw their Washington careers later end shamefully thanks to scandals involving serial womanizing (Packwood) and corruption charges (Rosty). So let's not get too nostalgic. But consider Rostenkowski's remarks on the passage of the bill: "Ladies and gentlemen, the political process worked. The center held. Every economic interest in the country has played a role in shaping this package."

When is the last time the center held on anything in Washington?

[Frank Stein · Rating 5 out of 5]

An amazing look at the backdoor machinations that created the seminal 1986 Tax Reform Act, and a beautiful case study in legislative process.

Despite dealing with the minutiae of tax policy, this book works great as an actual narrative for a few reasons. One is that the process of tax reform played out well as a series of set-piece battles, each in a distinct venue. It truly started in the Treasury building, where Secretary Donald Regan, at President Reagan's insistence, convened a panel of experts to imagine a perfectly equitable tax-code, one that would be revenue neutral, wouldn't change the distribution of costs across income groups, and would have few political considerations. Tax experts in the Treasury jumped at the bait, and created a real reformist proposal. When Regan switched jobs with Presidential Chief-of-Staff James Baker, Baker's new Treasury group tried to create something that approximated the first effort but was more aware of political realities. This bill then moved to Chicago-pol and Daley-acolyte Dan Rosentenkowski's Ways and Means Committee in the House, where Rosentenkoski managed to reinstate the state-and-local tax deduction, but generally kept the faith on reform. From there the bill moved quickly through the House, after some fracas in the Rules Committee, and onto Senator Bob Packwood's Finance Committee.

Though Packwood is today best remembered for the sexual harassment charges that caused him to resign his seat in 1995, at the time he was a reformer Republican with presidential aspirations. When his first attempt at a reform bill became mired in lobbyist and special interest amendments, he and his top aide retreated to the "Irish Times" bar across from the Capitol, and over a now famous "two-pitcher lunch" they decided to do what amounted to a hail mary pass. They would lower the top rate even lower than Reagan's own Treasury Department had dared. Instead of moving from 50% to 35, they moved from 50 to 25, and lowered the rest of the country's rates to 15%. They figured that if the rate was that low, many of the business lobbyists who fought so desperately for their own tax deductions would lay-off, realizing that the lower rate would benefit them overall. Despite putting many new deductions under the axe, the plan worked, partially by shaming Congressmen into supporting what was clearly a noble effort. From the Finance Committee the bill went to the floor, where Packwood prowled back and forth batting off anti-reform amendments. From there it went to the conference committee, which eventually delegated much of the work to just Rostenkowski and Packwood, who worked with their staffs to create a workable compromise. Sometimes the two legislative leaders even retreated from their staffs into a tiny alcove that overlooked the Capitol steps. In the end, the fate of millions of people and hundreds of thousands of jobs were haggled over in that tiny alcove.

Birnbaum and Murray bring out the drama in all this, and show how the political process affected the end product. In the Treasury plan, Regan decided on a series of three rates, 15-25-35 percent, because he didn't like the sound of the 16-28-37 rate his team had come up with earlier. He said those sounded "like a football call" or the combination to a lock. To pay for the lost revenue, he proposed a huge capital gains and corporate tax increase, thus reversing over 50 years of declines in these rates and even President Reagan's earlier tax acts, all because of the "sound" of the new rates was better. (These increases survived largely intact to the final bill.) In the Finance Committee a Senator half-jokingly handed out catheter bags to pee in, so the other Senators wouldn't have to run past the gauntlet of lobbyists outside to go to the bathroom during the bill markup (the lobbyists' swanky attire gave the hallway its nickname, Gucci Gulch).

In the end, despite all the underhanded dealing, the authors show how the political system, almost against the wishes of every member in it, managed to accomplish reform that in the end almost everyone admits was for the best. By eliminating thousands of unnecessary tax-breaks, they made the code less intrusive and more fair for everyone. It's taken almost 30 years to undue most of the gains made in that one act, so today's tax reformers should read this book to understand how, as one commentator said, "the impossible became the inevitable."

[Matt Popovich · Rating 5 out of 5]

Most people have seen Schoolhouse Rock enough to have a basic grasp of how a bill becomes a law, and have heard the term "lobbying" thrown around enough to have a vague idea of what it entails, but there's still so much about Congress that's wrapped up in mystery. Why can't members just find a way to get things done? It's frustrating, right?

This book is an excellent crash course on all the reasons why it's really, really challenging to pass a large bill with bipartisan support. And it manages the seemingly-impossible task of turning a debate over tax reform, of all things, into a page-turning political thriller in the process.

If you've ever wanted to really know how a bill becomes a law, how lobbying kills and waters down bills through wars of attrition, and how it takes a team of tirelessly dedicated members of Congress to guide a piece of landmark legislation through shifting political winds that can seesaw back and forth at a whiplash-inducing pace, then Gucci Gulch is a must-read.

[Travis · Rating 5 out of 5]

Great description of the legislative push to pass tax reform in 1986. This is not the book to read if you're looking for a deep substantive discussion of tax policy, but it does a great job showing the ups and downs of the legislative process... and the never ending drama that comes with it.

[Ale Gonzalez · Rating 4 out of 5]

How the sausage gets made.
“People think taxation is a terribly mundane subject. But what makes it fascinating is that taxation, in reality, is life. If you know the position a person takes on taxes, you can tell their whole philosophy. The tax code, once you get to know it, embodies all the essence of life: greed, politics, power, goodness, charity. Everything's in there. That's why it's so hard to get a simplified tax code. Life just isn't simple.”

[Doug Webb · Rating 5 out of 5]

Wow. This book was a tour de force, and absolutely one of the best political books I've ever read. Strange to say that I couldn't put the book - about a tax reform bill, no less - down.
The authors did a fantastic job (no surprise given their pedigree) of detailing the inner workings of Congress, how a bill is fashioned and reconciled, and providing fascinating descriptions of all the personalities involved. While the authors do a great job of breaking this complicated topic down, this book is also great for the policy wonks and tax junkies out there: the bill that was passed ultimately streamlined and simplified the tax code, but the process was incredibly nuanced and bumpy.
I couldn't recommend this book enough for anyone who is interested in our federal political process.

[Charles · Rating 5 out of 5]

An incredibly in-depth account of how the 1986 tax reform bill came to pass. As always, what strikes me is how contingent history is on personalities and idiosyncrasies, from the staff, to the administration officials, to the elected members.
Particularly relevant as Inflation Reduction Act defense is playing out in real time today. Also interesting to see the unique coalitional politics of tax reform (mainline democrats fighting for middle class with supply-side people elevated by Reagan interested in cutting taxes) paired with a unique, but not impossibly novel, compromise of budget-neutral reform.

[John DiConsiglio · Rating 2 out of 5]

Blow-by-blow account of the battle for the 1986 Reagan tax reform bill. Yes, there’s a whole book on that. WSJ reporters are adept at enlivening dry topics, but how much do you really wanna read about taxes? Fun when sketching the Congressional cast—the cerebral Bill Bradley, the biting Bob Dole, the blustery Dan Rostenkowski. Less fun when fixated on capital gains & municipal bonds. Published in 1987, only a year after the bill passed. Maybe that immediacy once gave the story a jolt. The thrill is gone.

[Douglas Humes · Rating 5 out of 5]

Well written, well balanced look at the negotiations that went into the historic tax reform law in 1986. There were good people in government, and perhaps there always are, though they seem to be getting lost in the polarization of the current age. But in the 70's and 80's, though politics was contentious, several Congressional leaders on both sides rode a wave of reform, and together crafted the most significant tax legislation of the age. It is a book that has more appeal to policy wonks, but it is a good general history of that time period as well.

[Paul Hinman · Rating 4 out of 5]

Interesting read, but failed to really dive into the specifics of tax law policy (although I recognize it was much more about the drama in getting there).

My biggest complaint was the way in which the epilogue seemed to undercut nearly all the rest of the work. After repeatedly stressing how hands off or non-directive the Reagan admin was to tax reform, in the end it claimed Ronald Reagan was among those who deserved the most credit. Even up to the last, Reagan was hedging his bet as to whether to support the tax reform legislation.

[David Page · Rating 5 out of 5]

An excellent book on how the Executive and Judicial Branches of the US federal government work together to create a compromise approach to enduring legislation. The process is not linear, and Birnbaum walks the reader through the winding details. The story in this book reveals what's wrong with American politics today, the willingness of both parties to find compromise behind closed doors.

[Iliya Liampert · Rating 5 out of 5]

A great historical incursion into the tumultuous world of the second Reagan admin and the complex story of the tax reform. At times reads like a fantasy where Democrats and Republicans work together across the aisle and share credit. The authors done a great job of introducing the rather complex aspects of taxation reform and the committee work, ultimately spanning an intriguing story.

[clara · Rating 2 out of 5]

i just don't like taxes this much. who likes taxes this much? i don't think enough happened to write a whole 300-page book about. the entire book, all that happened was guys argued about tax rates, and then the math guys tell them, 'your tax law will lose the government $17 billion' so then they have to do it all over again. god, i would have thrown myself out a window.

[Andrew · Rating 3 out of 5]

This book has been sitting on my shelf forever, so I finally decided to give it a read. It was a fine narrative history of a moment in political time 40 years ago, though it has little relevance or salience in today’s political environment. Interesting for the history.

[David · Rating 4 out of 5]

Interesting chronicle of the 1986 overhaul of the Internal Revenue Code. Yes, that's right: I said interesting.

[Dylan Scott · Rating 4 out of 5]

I don't know why you'd read this unless you needed to better understand the history of tax reform. But if you do, it's a pretty compelling and clearly narrated tale.

[Amber · Rating 3 out of 5]

My tour of 1980s seminal non-fiction continued with this...what I learned is that I'm not interested enough in politics to wade through all the details of the 1986 tax reform

[Brad Doran · Rating 5 out of 5]

Very insightful look in the legislative process behind tax reform. The book also does a great job painting a picture of some eccentric characters and stays lively throughout. Great book!

[Carol_Reads2u · Rating 4 out of 5]

read for grad school. I like books by journalists and “behind the scenes” of policy stuff

[Phillip Millman · Rating 4 out of 5]

Interesting book about the strangeness of politics

[Jackson · Rating 4 out of 5]

8/10

[Jordan Dickinson · Rating 5 out of 5]

Timeless that is relevant to this day

[David Sweeney · Rating 5 out of 5]

I was assigned this book as part of a newly formed book club comprised of congressional staffers and lobbyists. Unfortunately, our virtual book discussion was canceled due to Trump's second impeachment vote and the fallout that sucked all the oxygen out of DC. It wasn't one I would have selected on my own, but I'm glad it was forced upon me. Incredible insight into how the sausage is made.

[Tonya Woodbury · Rating 4 out of 5]

This book is an in-depth case study of the legislative process that led to the Tax Reform Act of 1986. As a policy analyst, I loved reading about a time when Congress actually functioned as intended, worked with the Executive and passed a piece of sweeping, landmark legislation that incorporated many legitimate and beneficial aspects of tax reform. After reading the book, I came away with the impression that passing any piece of major legislation is nothing short of an enormous miracle. This book highlighted for me the complexity of negotiating legislation and balancing the interests of not only individual legislators and the executive, but also a vast array of special interests representing essentially every major industry in America. Hey, everyone has to pay taxes. Overall, I think the book was a little too in-depth with the authors relating every precarious step and near-derailing of the whole bill. To be honest, it made be doubt whether legislation like this could be passed again in the current political climate. Kind of a depressing take-away, but it’s kind of a depressing state of affairs when Congress is so dysfunctional that they can’t fulfill their most basic Constitutional prerogatives and pass a budget, let alone reform the overly-complex and hole-ridden tax code. Sorry to end on a downer.

[Joe Martin · Rating 4 out of 5]

Birnbaum and Murray — two Wall Street Journal reporters — wrote this book just after Congress passed the 1986 Tax Reform Act. The Washington Post’s political reporter said it “reads like a thriller, which it is, with a remarkable cast of characters and a payoff in billions”. I’m not sure I’d go quite that far, but it was interesting and informative.

Birnbaum and Murray narrate the history of the tax reform effort, starting with Senator Bill Bradley’s initial doomed efforts. From there, we move to Reagan’s desire to dramatically lower tax rates and (House Ways and Means Committee) Chairman Rostenkowski’s desire to eliminate hundreds of tax loopholes. No one else really wanted tax reform.

How did we get tax reform? The authors walk us through it one roadblock at a time. Treasury Secretary Don Regan wanted the credit for pushing forward one of Reagan’s major goals. Chief of Staff Jim Baker wanted to loyally carry out the President’s requests. Chairman Packwood (of the Senate Finance Committee) wanted to win re-election and wanted to avoid being seen as an enemy of tax reform. The tax reform effort almost died three or four times during its three year incubation. Although it was the bill that no one wanted, it was also the bill that no one wanted to publicly oppose.

I learned a lot while reading this book. I was surprised by how uninvolved President Reagan was in the details of the bill. I was surprised by how many Republicans wanted to bury the bill and how many Democrats supported it. I reconfirmed my own lack of faith in government as I saw just how many “special interests” (and Congressman and Senators) fought for the survival of their own specific tax breaks (loopholes) in defiance of the common good.

This would make a great book for any high school civics class. Students would learn far more about how our government works (or doesn’t) from this one book than they would from any number of Schoolhouse Rock videos. You might be surprised at how few people are involved in writing large, complex bills. You might be surprised at how much power the White House staff exercises independent of the President himself.

This book was interesting enough to be engaging and educational enough to be a valuable resource on the way American government really works.

[Brian · Rating 5 out of 5]

I highly recommend this book. It’s all about the unlikely triumph of a massive tax reform package during the height of the Reagan years and in the face of well-funded corporate opposition. The hero, at least for me, is Bill Bradley. He was a not-very-powerful junior senator who learned the ins and outs of tax policy, and slowly rallied colleagues on both sides of the aisle to embrace the idea. There were many other fascinating players – Rostenkowski, Packwood, Don Regan – with parochial interests that would somehow align – but it was Bradley who carried intellectual and moral authority to the very end.

With more unregulated campaign money than ever, with a media that scores political wins and losses by the minute, and without men like Bradley in the Senate, it’s no wonder tax reform never came to pass during the 2011 debt ceiling crisis.

[Alexander · Rating 4 out of 5]

A good book if you're the kind of person who likes this kind of book. Seeing as it was about the Tax Reform Act of 1986, I'm going to wager that's no one other than me. Well-written, interesting, and accessible, although sometimes intra-chapter organization is not great.

Weird to think Rostenkowski wound up in jail and Packwood had to resign to avoid expulsion. Also filled with fantastic quotes, some of which are from people who go on to do interesting things.

[David Buzby · Rating 3 out of 5]

Read this more for work than pleasure as Congress is contemplating a 1986-style overhaul of the tax code and we would have a bit part in that. I found it a bit dry but an interesting read. I thought its perspective it gave on the major players in Congress on the 1986 tax bill - Sen. Packwood and Rep. Rostenkowski - was very interesting as it was before scandal took down both of them in the 1990's.

[Bobby Otter · Rating 4 out of 5]

The book does a very good job at telling the story of the 1986 tax reform. The authors do not leave a leaf uncovered and in doing so probably give more information than what is neccessary. But for a book where one already knows the out come, it reads as a thriller at time. Recommended to anyone interested in politics, policy, or DC in general.

[sima · Rating 5 out of 5]

Amazing read for the politics and insider-scoop behind what was one of the most monumental policy accomplishments of all time. A real insight into how Congress and the Administration work together to get law done. It's well-written as well, and I think any political or tax policy work would find it a good read.