Senate Dems consider doing tax reform through budget reconciliation measure

Democrats on the Senate Budget Committee will meet late Tuesday to consider whether to include instructions in their budget to the Senate Finance Committee on doing tax reform this year.

Democrats are trying to hammer out their first budget in four years.

The decision on giving Finance instructions on how to accomplish tax reform — and how much to raise taxes — is a key choice for the panel as it could allow it to move tax reform with a 51-vote majority.

Budget resolutions can be used to fast track major policy legislation through a process known as reconciliation, a process that could make it easier to move legislation through the Senate since it cannot be filibustered.

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Committee Chairwoman Patty Murray (D-Wash.) told The Hill on Tuesday she is still aiming to mark up a fiscal 2014 budget next week, which could set the stage for marathon amendment votes the week of March 18. If the Senate does not pass a budget by April 15, members will not receive their paychecks under a new law passed in January. 

“I am working with all of our folks to make a determination on that going forward,” Murray said of the tax instructions. 

Murray said at a Tuesday hearing that tax loopholes must be “just as closely examined” as spending in addressing the budget deficit. 

But some members of Finance are opposed to detailed instructions that could tie the hands of tax writers. A Finance Committee aide said that Chairman Max Baucus (D-Mont.) does not believe reconciliation is the way to do tax reform. 

"Using the procedure requires each and every tax code change to score as not adding to the deficit," a Finance aide said. That makes simplification of the code impossible, the aide argued. In addition, the main hurdle to tax reform is House Republican demands that the reform not add any new revenue, not so much the objections of Senate Republicans, the aide said. 

Other sources with knowledge of the budget process say that revenue would only have to be raised overall in the package, so this is not an issue.

The aide said Baucus and Murray are meeting regularly to come to an agreement. 

Budget Committee member Sen. Ron Wyden (D-Ore.) supports using reconciliation and suggested Tuesday that the instructions could be left vague enough to give the Senate Finance Committee, on which he also serves, flexibility to design tax reform.

“All you can really do on the Budget Committee is lay out some very general parameters,” said Wyden, who has talked to Baucus and Murray about the issue. “You can’t write a major tax reform bill in the Budget Committee.”

Wyden said that the budget process can start a debate about the value of certain deductions like the deduction for charitable giving, which he said may be worth preserving, and tax-exempt bonds issued on behalf of corporations, of which he is skeptical. 

Committee member Sen. Bernie Sanders (I-Vt.) said he and his colleagues will be looking to hammer out a top-line revenue increase number for their budget at a Tuesday night meeting.

“We need substantially more revenue,” he said. “We are working on that right now.”

He said the budget “may” include reconciliation instructions but that had not been decided.

Sanders in the past has demanded a minimum tax on millionaires and may do so for this budget.

Murray needs all the Democrats on the committee to support her budget. A single no vote would prevent the budget from moving out of the committee as Republicans as expected stick together and oppose the Democratic budget.

This story was updated at 2:44 p.m.