Time ticks on launching tax reform effort in weeks-old Congress

The new Congress may be just weeks old, but time is already ticking for lawmakers pushing to overhaul the tax code.

The concept of tax reform has backers on both sides of the aisle on Capitol Hill, not to mention at the highest levels of the Obama administration.

{mosads}But officials also say they believe that tax reform would be a long, complicated process, much like it was the last time Washington successfully revamped the code in 1986. And some say more detailed discussions would need to start soon for a reform package to have any chance of passing by the end of next year – especially considering that 2012 is a presidential election year.

“I think right after we get through this Kabuki dance that we can start right away,” Rep. Bill Pascrell (D-N.J.), a member of both the House Ways and Means and Budget panels, said Friday, hours before the chamber voted to slash some $60 billion from the federal budget. “You’re never going to finish it in one year. Never.”

Tax reform was also a frequent topic when Treasury Secretary Timothy Geithner testified before a string of congressional committees last week about President Obama’s fiscal 2012 budget, appearances that not only reinforced the interest in overhauling the tax code but also may have illustrated the difficulty in reaching consensus on the issue.

Meanwhile, a bipartisan group of senators is also having a discussion about broad deficit reduction, talks that are touching on tax reform. The administration is monitoring those negotiations, but Republicans have also said the president is not showing enough leadership on budget issues – or tax reform, for that matter.

During his Capitol Hill appearances last week, Geithner reiterated repeatedly that the United States needed a corporate tax code that would allow its companies to be more competitive internationally.

And in fact, Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, signaled after one of those hearings that the administration’s general interest in tax reform was one of the few aspects of the president’s budget he could get behind.

Still, potential roadblocks to tax reform continued to reach the surface. Geithner said during his days of testimony that corporate tax reform could happen before the individual code is revamped, while Camp and Sen. Ron Wyden (D-Ore.), among others, have called for a more comprehensive overhaul.

The Treasury secretary also stressed that any changes to the corporate tax code would have to be revenue-neutral, an idea that has not exactly been embraced by some on the GOP side.

“We don’t think we can add to the burden on corporations in America, because they exist in a more competitive world,” Geithner told the Senate Finance Committee. “But we also don’t think we can ask other businesses, other individuals to pay a higher rate so we can lower the effective rate on the business community as a whole.”

Furthermore, some of the tax proposals included in the White House’s budget, including letting the Bush tax cuts lapse for the wealthiest taxpayers at the end of 2012, landed with a thud among Republicans. The administration cast some of those proposals as a down payment on corporate tax reform, but Rep. Kevin Brady (R-Texas) termed them “dead on arrival in this House” at a Ways and Means hearing last week.

All those factors, coming with both parties gearing up for a presidential campaign, have led some lawmakers to declare that it would be difficult to pass a tax reform package by the end of this Congress. Geithner and others have also noted that the last successful push for tax reform, which occurred during Ronald Reagan’s second term in the White House, took several years.

“Based on what happened in 1986, where it really took probably closer to four years to get a tax bill, I would think it’s going to take longer,” said Rep. Charles Boustany (R-La.), a member of the House Ways and Means Committee. “What we need to do is lay the groundwork. We need an extensive series of hearings to look at the entire code.”

For his part, Sen. Tom Coburn (R-Okla.), one of the bipartisan group of senators looking at deficit reduction, wrote in a Washington Post op-ed dated Friday that the president needs to take more control to help get the country’s books in order.

A spokesman for the senator added that Coburn believes that leadership is needed on a variety of fronts, including reforming entitlements and the tax code. Brady, a senior member of House Ways and Means, is also signaling that the administration needs to take more of the reins on tax reform.

“Dave Camp wants to move a bill, but he really needs some leadership from the White House,” Brady said.

A Treasury spokeswoman noted recently that Geithner has met with a broad range of stakeholders – including business leaders and think tank officials – to discuss the tax code, but added that “we do not have a set timeline” for reforming it. And some Democrats have said that Obama has already shown more leadership on the issue than some of his Republican predecessors.

Wyden, a longtime proponent of overhauling the tax code, also acknowledges that a reform plan could be something of a tough lift this Congress. But the Oregon senator also likes to add that the 1986 tax reform helped spark job creation and that the idea could get more of a hearing given the state of the economy.

“I think once there is a political judgment that it’s time to go in a bipartisan way around the contours that Democrats and Ronald Reagan came together, I think you can get a lot of movement in a hurry,” Wyden said.