With the clock already ticking to the next fiscal deadline, lawmakers will probably come up short in efforts to include a revision of the tax code in year-end budget talks.
Taxes are sure to be a part of the discussion as the conference committee looks for ways to bridge gaps between Democratic and Republican approaches to spending, tax lobbyists and analysts told Bloomberg BNA.
Unless the two sides can agree on whether to seek greater government revenue -- and how to use any additional revenue that a tax revision may generate -- a breakthrough on revamping the tax code isn’t likely. The conference committee must report to Congress by Dec. 13 as part of the deal lawmakers reached to reopen the government and raise the debt ceiling.
“It certainly provides an opportunity for tax reform, although it’s a long shot,” said Robert Bixby, executive director of the Concord Coalition, a fiscal advocacy group. “The real sticking point is what to do with the resulting revenue. That hasn’t gone away.”
The budget provides a forum to advance the issue and possibly set up a process that can prevent Senate filibusters or other procedural hurdles and move tax revisions faster, analysts said. The basic approach to a tax rewrite -- reduce top rates, simplify the code and broaden the tax base -- is a point of agreement between House Ways and Means Committee ChairmanDave Camp, a Republican from Michigan, and Senate Finance Committee Chairman Max Baucus, a Montana Democrat.
Broader issues about revenue still divide the parties so deeply that some analysts question whether a budget conference will push a tax bill forward. Generally, Democrats seek greater tax revenue to boost programs and reduce the deficit, while Republicans want any additional revenue to come from economic growth that may be achieved through lower tax rates and other policies.
The conference committee may map out an expedited process for a tax overhaul, perhaps directing congressional committees to take action by a certain date. It may also offer direction on top tax rates, although some Republican members of the Ways and Means Committee told BNA that specific rates could be left out of any tax overhaul instructions and be left to the tax-writing committees to work out later.
The House-passed budget envisions a top corporate and individual tax rate of 25 percent, down from a top corporate rate of 35 percent and a top individual rate of 39.6 percent.
The committee may also strike a balance between new revenue from a tax revision and savings from changes to entitlement programs, a potential path through the tax and spending stalemate in Congress.
Or, the committee’s deliberations may slow tax changes in the short run by giving Camp a reason to delay introducing a bill if he is having trouble building support, said John Buckley, a professor of tax law at Georgetown University and former Ways and Means chief tax counsel for Representative Charles Rangel, once the panel’s top Democrat.
“I don’t think fast-tracking is the issue here,” Buckley told Bloomberg BNA. “I think votes are the issue.”
Camp has consistently said he intends to introduce a bill in time for a vote in the committee in 2013.
Revenue remains a “tremendous” challenge between the competing budgets offered by House Budget Committee Chairman Paul Ryan, a Wisconsin Republican, and Senate Budget Committee Chairman Patty Murray, a Democrat from Washington, said Jonathan Traub, a former Republican staff director on the House Ways and Means Committee and managing principal for tax policy at Deloitte Tax LLP.
The Republican-led House and Democratic-led Senate are so far apart on revenue, and on the politics behind that issue, that an agreement will be challenging, Traub said.
Bixby said he doesn’t expect Republicans to agree to use any revenue from code revisions for debt and deficit reduction unless they receive spending cuts to entitlement programs in return, nor does he expect Democrats to agree to cut spending on entitlements unless they secure tax overhaul revenue for debt and deficit reduction in return.
“The political reality of selling some tough choices on entitlements where you’re asking people to accept some changes in their benefits is much easier to do if you show it’s part of a shared sacrifice somewhere in which tax reform is raising revenues,” Lorenzen told Bloomberg BNA.
Camp could hold intact the structure of a revenue-neutral bill to overhaul the tax code and “turn a couple of dials to raise revenue,” he said.