Tax writers: Deal won’t block code reform

The top two tax writers in Congress signaled Monday that the push for tax reform would not be affected by the work of a new deficit-reduction committee.

Unlike other recent deficit plans, such as the one from the Senate’s Gang of Six, the debt-ceiling agreement reached by congressional leaders and the White House does not include a deadline for tax reform, as some lawmakers and stakeholders had hoped.

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But Rep. Dave Camp (R-Mich.), the chairman of the House Ways and Means Committee, and Sen. Max BaucusMax Sieben BaucusOvernight Defense: McCain honored in Capitol ceremony | Mattis extends border deployment | Trump to embark on four-country trip after midterms Congress gives McCain the highest honor Judge boots Green Party from Montana ballot in boost to Tester MORE (D-Mont.), head of the Senate Finance Committee, both said that the latest framework, would not be a roadblock to their quest to overhaul the tax code. 

“I am hoping that getting this off the table gives us an opportunity to refocus on fundamental tax reform,” Camp said. “Tax reform should be about tax reform, not about deficit reduction.”

“I do think it is important for us to begin tax reform this year. And it takes time,” Baucus said. “I’d like to begin serious hearings on tax reform.”

Taxes were the biggest sticking point in the negotiations between Democrats and Republicans over what to include in a legislative package raising the debt limit. 

Democrats argued that tax preferences for the oil-and-gas industry and other credits and deductions should be used to roll back the federal debt, while Republicans pushed back against using tax increases to fight deficits.

The eleventh-hour debt-ceiling deal, struck over the weekend, would create a 12-lawmaker panel tasked with finding an extra $1.5 trillion in deficit cuts. The two parties are already at odds over what budgeting baseline that panel would use.

The plan could set up a showdown over the Bush-era tax rates, with Obama signaling that he could use their scheduled expiration next year as leverage in the tax-reform debate.

Still, even with all those stumbling blocks, some key lawmakers remained hopeful on Monday that the special deficit panel could find a way to revamp the tax code, even though it won’t be required to.

Sen. Kent Conrad (D-N.D.), the Budget Committee chairman and a Gang of Six member, told reporters that the joint committee could craft a deficit deal that includes tax reform. 

“This has the potential to get us to the grand compromise, which ultimately is going to be required,” he said.

Sen. Dan CoatsDaniel (Dan) Ray Coats10 declassified Russia collusion revelations that could rock Washington this fall 11 Essential reads you missed this week Trump crosses new line with Omar, Tlaib, Israel move MORE (R-Ind.) said he would have preferred that the deficit committee had been given explicit instructions to overhaul the tax code.

Still, Coats, a sponsor of bipartisan tax reform legislation in the Senate, said he also believed tax reform could play a central role in the panel’s discussions, as Republicans try to avoid triggered defense cuts and Democrats try to avoid deeper spending reductions.

The two parties would likely first have to bridge the current gap over which baseline the joint deficit panel would use. Still others were concerned that the committee — which would have to find its deficit cuts by late November — would have enough time to examine the tax code before revamping it.

“Four months is not a very long time,” said Clint Stretch, managing principal for tax policy at Deloitte Tax. “The last time we had tax reform, in 1986, they started with a 500-page proposal and it still took 18 months.”

Top GOP lawmakers have told their rank and file that the baseline the committee would use assumes that the Bush-era tax rates would not be extended and that the Alternative Minimum Tax is not patched. Because of that, Republicans say, the 12-member panel would have to raise taxes by more than $3.5 trillion in order for any revenue to count toward deficit reduction.

Conrad and Baucus have a different take. They said Monday that the committee could, by a majority vote, decide to use a different Congressional Budget Office baseline — and that if it chose an alternative starting point, it would make it easier to count new revenues toward deficit reduction.

But a senior House Republican aide countered Monday that, while technically true, Baucus and Conrad’s point was all but irrelevant, as none of the GOP members appointed to the panel would even consider such a move.

“The joint committee can consider anything it chooses to do,” Senate Minority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellDavid Axelrod after Ginsburg cancer treatment: Supreme Court vacancy could 'tear this country apart' Pelosi asks Democrats for 'leverage' on impeachment Democrats press FBI, DHS on response to white supremacist violence MORE (R-Ky.) told Fox News Radio. “But I think it’s pretty clear you couldn’t get a tax increase through the House of Representatives. So that would be a pretty big deterrent, I think.”

With the possibility of the joint committee deadlocking, the White House signaled Sunday night that the president would use the Bush tax rates, which are scheduled to expire at the end of 2012, to help create pressure for a deal more to the president’s liking.

Some Democrats welcomed the president’s threat to stand firm against an extension of the Bush tax rates for the wealthy. But pointing to this most recent debt-ceiling deal and last year’s tax-cut compromise, some lawmakers and liberals worried that the president would not follow through on his pledge. 

“I’ve now come to the point of believing that one of the ways that you’re going to get to tax reform is that the president has got to say that there’s no way he’ll go along with extending the Bush tax cuts again,” said Rep. Richard Neal of Massachusetts, the ranking Democrat on a Ways and Means subcommittee that deals directly with taxes.

“If he stays with it,” Neal added, in an apparent reference to last year’s deal to extend all of the Bush tax rates for an additional two years. “I stayed with it. He didn’t.”

Vicki Needham contributed.