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Why Baucus's retirement won't make tax reform any easier

April 23, 2013: 1:38 PM ET

As Democratic Senator Max Baucus plans to step down, his party's leaders want to push him to meet them in the middle on corporate tax reform.

By Tory Newmyer, writer

Sen. Max Baucus

Sen. Max Baucus

FORTUNE -- With the news Tuesday that Senator Max Baucus, chairman of the tax-writing Finance Committee, will not seek a seventh term in 2014, prospects for a comprehensive overhaul of the corporate tax code appeared to brighten. In this case, appearances are deceiving.

Hacking away at a 5,600-page tax code in pursuit of a fairer, simpler system presents a steep challenge. Business interests unanimously favor lowering the 35% top rate -- the highest in the developed world -- but few actually pay it, thanks to a code littered with special-interest carve outs and preferences.

And when lawmakers propose zeroing out individual loopholes to fund the bigger goal of a lowered rate, they set off a rash of corporate NIMBYism: "By all means lower the rate," each and every interest that can afford a lobbyist argues, "just leave my break alone." With trillions of dollars on the line, there is no legislative exercise that generates as much lobbying heat, and members of Congress hoping to navigate the process while fundraising from those interests to finance a reelection bid face a seemingly impossible task. No one knows it better than Baucus, who boasts the largest network of former aides-turned-tax lobbyists on Capitol Hill.

Such is the backdrop for Baucus's home-state squeeze in Montana. He faced the possibility of a primary from the left against former governor Brian Schweitzer and then an assuredly tough general election fight in a Republican-leaning state. The 73-year-old had already been moving to distance himself from one of his signature accomplishments, the Affordable Care Act; and he cited Montana considerations earlier this month in joining three other Democratic Senators who helped sink President Obama's gun control push. There was hardly a clamoring for corporate tax reform in Montana, home to precisely zero Fortune 500 companies. So it was hard to see the political upside for an increasingly-cautious Baucus in diving into the viper's nest of that debate.

MORE: The real reason corporate tax reform is going nowhere fast

Then won't his decision launch him into a lame-duck beatitude, freeing him to pursue a tax rewrite as a career capstone without the electoral worries? Not really. Baucus faces an entirely different set of constraints within the Senate, and those just got tighter. He may remain the chairman of the Finance Committee, but he still answers to leaders with whom he has a history of clashing (besides the gun vote, his recent apostasies include opposing the Senate budget, along with three other Democrats).

It's a fact on display today, as the chamber considers an Internet sales tax bill that Baucus joins a minority in opposing. He wanted to consider the measure as part of the broader tax reform debate, but Senate Majority Leader Harry Reid (D-Nev.) strong-armed him with a maneuver to bypass his committee and bring the bill straight to the floor.

That dynamic will only be magnified now that leaders no longer need to brook his maverick tendencies in the name of his self-preservation. "He has no leverage," one tax lobbyist observed.

A Senate Democratic leadership aide underlined that point: "He is more isolated than he's ever been within the caucus, and that's saying something. Pursuing a legacy accomplishment would mean he has to at least meet the caucus in the middle, which it's not clear he has any intention of doing. There is almost no upside for the caucus (or leadership) in letting him have his way, when he is so far out of step from where the caucus is right now."

Baucus insists he's far from done. "I'm ready to roll up my sleeves and get to work," he said in a statement confirming his decision not to seek reelection. "At a national level, I will continue to work on simplifying and improving the tax code, tackling the nation's debt, pushing important job-creating trade agreements through the Senate, and implementing and expanding affordable health care for more Americans."

Baucus may believe he now has a wider berth to pursue those goals. His minders in Senate leadership believe differently.

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