Talk about overhauling the tax code is picking up across Capitol Hill this spring, with lawmakers of both parties agreeing on the need to simplify the system but remaining far apart on the details of how to do it.
A tax overhaul "is long overdue," said Rep. Ron Kind (D., Wis.), the chairman of the New Democrat Coalition, a group of centrist House members. The current code, he said, is "a monstrosity."
Obstacles to a tax rewrite remain high. And odds of success are still low.
Still, supporters increasingly see a tax-code revamp as a potentially achievable goal -- perhaps as part of a so-called grand bargain to reduce budget deficits -- that could boost the sluggish economy.
A tax rewrite "ranks as one of the highest" priorities for House Republicans, said Rep. Kevin McCarthy of California, the GOP whip. "The only way to get out of this mess" of slow growth and chronic high deficits "is to grow our economy. This is the best way to do that."
Some Democrats are eager to move, too. Sen. Max Baucus of Montana, the Finance Committee chairman who recently announced that he won't seek re-election in 2014, said he is "doubling down on tax reform."
But big gaps remain between Republicans and Democrats, particularly on the question of whether a tax rewrite should include provisions to raise revenue. Democrats generally say it should. Most Republicans say that it shouldn't, that any new revenue should come only from the resulting economic growth.
The parties also are divided on the process. House Republicans are discussing whether to seek a tax rewrite as part of an agreement to raise the government's debt ceiling later this year. Such an agreement likely would create fast-track procedures and time lines for a tax overhaul, to speed passage, and could include cuts to future spending. But the White House says it won't negotiate the terms of a debt-ceiling increase.
PresidentBarack Obama wants a tax-code rewrite to be part of a broad deficit-reduction deal that boosts revenue and curbs entitlement spending over time. Such a deal would replace the across-the-board cuts, known as the sequester, that began March 1 after Congress couldn't reach a broader deficit-reduction agreement.
The parties don't agree on other goals of a tax rewrite. The administration has proposed a framework for overhauling corporate taxes that includes limiting deductions and lowering rates. But Mr. Obama hasn't proposed lowering rates for individuals, as many Republicans want.
House Ways and Means Chairman Dave Camp (R., Mich.) has been trying to build support for his version of a tax overhaul by holding meetings with rank-and-file Republican House members. He comes armed with GOP polling showing that two-thirds of Americans think the current tax system is unfair. The data suggest that Americans are more interested in simplifying the tax code and making it fairer than in getting a tax cut, according to a person familiar with the matter.
Mr. Camp's message is that lawmakers can make the tax code work better for families and small businesses. Lowering tax rates remains important but isn't the sole focus of the pitch. A senior House GOP aide said the sessions are intended to sound out members and prepare them for the possibility that a framework for a tax overhaul could be part of a broader budget deal later this year.
Mr. Camp and other GOP leaders have said they want to move to a system with just two rates -- 25% and 10% -- for both individuals and small businesses, and one rate of 25% for corporations. Currently there are seven rates for individuals, with a top rate of 39.6%. The top corporate tax rate is 35%. They would make up the lost revenue by curbing tax breaks.
Some Democratic lawmakers are already voicing objections to the GOP approach. Rep. Sander Levin of Michigan, the top Democrat on the House Ways and Means Committee, said Republicans' goal of lowering top individual and corporate rates to 25% is unrealistic.
"I don't see how you do it without a major tax cut for the very wealthy," Mr. Levin said. "And to make [the revenue] up, I think that means a tax increase for the middle class. I don't see how else you do it."
For their part, Republicans think if Democrats, particularly Mr. Obama, opposed an effort to overhaul the tax code, they would risk appearing to obstruct a measure that could help the economy.
"Republicans have been trying very hard to simplify a burdensome tax code and unleash economic growth," said Don Stewart, a spokesman for Senate GOP Leader Mitch McConnell. "But the most serious roadblock now is the president, who views tax reform as a way to get more tax hikes for more government rather than as a way to promote job growth."
A White House spokesman pointed to recent comments by press secretary Jay Carney, who said that "the president believes that tax reform needs to be part of a budget process that produces revenue so that we can reduce our deficit in a balanced and fair way. . . . The only proposal on the table is the House Republican budget, which reforms the tax code in a way to give additional massive tax breaks to the rich, while raising taxes on the middle class."
The springtime chatter about overhauling the tax system could fade amid partisan bickering. But if a big budget deal emerges this summer, it is increasingly likely to include elements of a tax rewrite
