Pessimism grows over prospects for bipartisan tax reform deal

Democrats on the House Ways and Means Committee are growing more pessimistic that a bipartisan tax reform deal can get done this year, despite the best efforts of the panel’s chairman, Rep. Dave Camp (R-Mich.).

Lawmakers on both sides of the aisle have expressed an interest in rewriting a tax code that has ballooned to 4 million words, while Ways and Means members just finished up work on 11 separate groups that examined all areas of the tax code – a process that Democrats and Republicans called helpful.

{mosads}But the two parties also remain deeply divided over whether the government should collect more revenue, an argument that has only intensified after the recent fiscal cliff deal increased government collections by some $600 billion.

Camp has stressed that he plans to pass a tax reform package out of Ways and Means this year, and that the savings from cutting tax preferences should go exclusively toward lowering the top corporate and individual rate to 25 percent. Those rates currently stand at 35 percent and 39.6 percent, respectively.

But Democrats on the committee say that, unless some of the revenue from tax reform is earmarked for deficit reduction, they don’t see much chance of that happening on a bipartisan basis.

“Zero,” Rep. Jim McDermott (D-Wash.), a senior Ways and Means member, told The Hill on Thursday.

Democrats add that negotiations on tax reform won’t be helped by the fact that Washington’s deadlock on fiscal issues is extending to areas like gun control.

“I still hold out that there’s an opportunity for reasonable minds to agree, but I increasingly don’t see that happening,” said Rep. John Larson (D-Conn.).

The budget Senate Democrats passed last month had almost $1 trillion in new revenue, while the House Republican framework had none.

Senate Finance Chairman Max Baucus (D-Mont.), Camp’s counterpart across the Capitol, has said that he believes tax reform should raise revenues, but that his party’s framework went too far on that front.

Still, Baucus and Camp meet regularly on tax reform, and both have suggested they want an overhaul to be bipartisan. Baucus currently is holding weekly meetings with the entire Finance panel, with an end goal of pushing a comprehensive plan through the committee.

Camp has said he that he believes that President Obama is moving in the right direction on tax reform, and has released three separate draft proposals that have received praise from both tax experts and Democrats.

Obama’s most recent budget also raises less than Senate Democrats, and opens the door for a revenue-neutral revamp of the corporate tax system.

“I think you build consensus, and consensus on big things, from the committee level up,” Camp told reporters this month. “You need members to be involved.”

The Michigan Republican also received the prime legislative position of H.R. 1 for tax reform from his longtime ally, Speaker John Boehner (R-Ohio), after Boehner at first sounded hesitant this year.

“I’m going to walk down every street I can to get tax reform done,” the Ways and Means chairman said. “But I think it’s important at this stage to use the committee process for that.”

Camp also has good political reasons to want Ways and Means to pass a bipartisan tax bill.

Given that a reform bill would almost certainly have to cut or eliminate popular tax breaks, a measure with broad support could ease the concerns of rank-and-file Republicans who feel that they frequently take tough votes, only to see them die in the Senate. A bipartisan bill could also put even more pressure on the Senate to move on the issue.

But while Ways and Means Democrats said the tax reform working groups broadened their understanding of the code and improved working relationships on the committee, they also say it’s a big jump from those meetings to crafting a broad tax code rewrite.

“You ask every one of those chairmen. They’ll say, well, we had a great relationship,” Rep. Bill Pascrell (D-N.J.) said about the working groups. “Has nothing to do with the question [of] can we really come to a resolution.”

McDermott said that any relationships the working groups built up between Republicans and Democrats could not overcome the years of gridlock and distrust between the two parties on issues like sequestration and the debt ceiling.

The Washington Democrat said he could see a scenario where Republicans were able to pick off more centrist Democrats for a reform measure, but that he had no expectations that the bill would be negotiated in a bipartisan fashion.

“I think there are some guys trying. They just don’t realize the obstacles,” McDermott said.

But given Camp’s determination to pass a tax rewrite, Democrats also have an incentive to have a major involvement in the process. Some tax writers in the party have said it was too early to say how tax reform would play out, or that they would withhold judgment until they saw a bill.

Rep. Ron Kind (Wis.), a Ways and Means Democrat seen as one of the more likely to get on board with tax reform, said areas of compromise between Camp, Baucus and the White House were beginning to develop.

“You can actually see where this has the potential of coming together because there are a lot of bridges there that can be crossed,” Kind, the chairman of the business-friendly New Democrat Coalition, told The Hill.

But Kind also noted that the more delicate discussions over what tax breaks to eliminate in reform had yet to really begin.

The top Democrat on Ways and Means, Rep. Sandy Levin (Mich.), has long criticized Camp and Republicans for setting rate-cutting goals, while being vague on how they plan to accomplish that. But Levin also told The Hill recently that the tax reform process still had a ways to go.

“This in such an early stage,” Levin said. “I think to project its course is really not very feasible.”