James Baker as a Master of Negotiation: Tax Reform
Watch this video clip from the documentary to learn more about how Baker worked with both Democrats and Republicans to promote tax reform. As you watch, ask yourself:
- What benefits did Democrats gain via the Reagan tax reform plan?
- What benefits did Republicans gain?
- What role did James Baker play in getting the tax reform bill enacted into law?
Negotiations require an artful balance between giving and taking — each side must yield a bit in order for everyone to reap some benefits. But the best negotiators don’t just focus on their own agenda; they also consider the wants and needs of their opponents. James Baker believed strongly in understanding the person across the table from him — and in trying to solve that person’s problem. Baker’s careful attention to opposing points of view and his willingness to compromise allowed him to solve problems that others considered insurmountable.
In the mid 1980s, tax reform was one of the seemingly impossible tasks that Secretary of the Treasury James Baker undertook for President Ronald Reagan. At issue was an extremely complicated tax code. Republicans wanted to cut taxes, but Democrats were wary of the Reagan administration’s concept of tax reform.
Baker approached the project by reaching out to Democratic Representative Dan Rostenkowski. As the powerful chair of the House Ways and Means Committee, Rostenkowski knew the tax code inside and out. Politically, the two men were at opposite sides of the table, but Baker knew that if he could work out a deal with Rostenkowski, the Democrats would agree to the plan.
After months of negotiations, Baker and Rostenkowski were finally able to settle on a plan to which the House Democrats would agree. But just as it looked like tax reform might pass, House Republicans balked. They complained that Baker had conceded too much to their opponents.
Baker knew that concessions are a natural part of any negotiation. He spoke with President Reagan and urged him to lean on the House Republicans. With Reagan’s help, the tax reform bill passed. It had taken more than a year of negotiations, but Baker and Rostenkowski had managed to craft a bill that both parties could agree to pass. Baker’s reputation as a master negotiator was solidified.