Tax reform divisions surface among Dems

A top adviser to Senate Majority Leader Harry Reid (D-Nev.) scoffed at the idea of a business-only tax reform plan on Thursday, bringing to the surface a Democratic divide over taxes.

{mosads}Cathy Koch, Reid’s top staffer on taxes, said a tax overhaul that only helps businesses would carve out the millions of taxpayers who have felt left behind in the economic recovery.

“We have trouble leaving the household sector out of something that people look at as a benefit for business. That’s going to be tough.” Koch said at an event sponsored by Bloomberg BNA and hosted by KPMG.

“You can’t really ignore that side of the economy,” Koch added about individuals.

But for several years, President Obama and his Treasury Department haven’t seen it that way. Treasury released draft principles for business tax reform in 2012, and the Obama administration has shown little interest in expanding a tax revamp out to the lion’s share of individual taxpayers.

Both Obama and the incoming Senate majority leader, Mitch McConnell (R-Ky.), have pointed to tax reform as a potential area for compromise once Republicans take full control of the Congress in 2015.

Analysts, aides and even lawmakers have questioned how realistic that goal actually is, considering that Democrats and Republicans have long had differences over tax reform — most notably over whether an overhaul should raise more revenue for the federal government.

But the comments from Koch and Todd Metcalf, the top tax adviser to Senate Finance Committee Chairman Ron Wyden (D-Ore.), underscore that there’s internal division over tax reform in both parties.

“Everybody focuses on business tax reform because obviously there are very loud voices out there saying this is a problem,” Metcalf, whose boss has long been an advocate for a more comprehensive approach, said at the event.

Most Republicans believe that tax reform needs to revamp both the individual and corporate systems, in large part because so many businesses pay taxes as individuals. But some GOP lawmakers, such as Sen. Rob Portman (Ohio), have sounded more open to business-only reform.

Policymakers could conceivably craft a reform plan that covered corporations and those businesses that pay taxes as individuals.

On the Democratic side, prominent officials like Sen. Charles Schumer (N.Y.) have sounded skeptical of plans that would lower the top individual tax rate down from the 39.6 percent put into place during the “fiscal cliff” deal almost two years ago.

Reid’s aide acknowledged that a more comprehensive plan would be tougher for lawmakers to craft, but insisted that was the better option than a deal that would primarily help corporate interests.

“It’s a harder job, but it’s our responsibility to do it,” Koch said.