Budget talks complicate tax reform

The top congressional tax writers are now facing just the latest wrinkle in their efforts to rewrite the code: a budget conference.

Senate Finance Committee Chairman Max Baucus (D-Mont.) and House Ways and Means Committee Chairman Dave Camp (R-Mich.) both have said they plan to put pen to paper on tax reform plans within the next several months.

{mosads}But in the meantime, a slew of budget conferees will be sitting down to try to reconcile the radically different House and Senate budgets by Dec. 13, as part of a deal struck to end the recent fiscal standstill.

And while Camp and Baucus put on happy faces this week and suggested they would be resources for the budget conferees, they also made clear the newest fiscal committee wouldn’t slow down their work on rewriting the code for the first time in more than a quarter century.

“I’ll be working with all members of that committee to help with the tax components and also the entitlement components,” Baucus told Bloomberg Television. “But at the same time, we’re going to be working ahead in a parallel way to move on tax reform.”

Meanwhile, Camp told reporters that he was ready to concentrate more of his efforts on tax reform, after the government funding fight that enveloped Washington this month.

“I’m looking forward. I’m not looking back on the last two weeks. Do we really need to revisit those again?” Camp said Wednesday.

“If the budget conference isn’t successful, we can always fall back on regular order,” the Michigan Republican added.

Senate Budget Committee Chairwoman Patty Murray (D-Wash.) and House Budget Committee Chairman Paul Ryan (R-Wis.) have so far been tight-lipped about what sort of an agreement they hope to reach — saying, for instance, that they hope conferees can find “common ground.”

The conference committee could go so far as to put tax reform instructions in place, though Murray also said this week that the panel’s goals were narrower than the failed 2011 supercommittee.

On the flip side, conferees could decide that the revenue side of the two budgets, which are hundreds of billions of dollars apart, are irreconcilable and just leave taxes out of their agreement.

Both Baucus and Camp have said that, while they’re pressing ahead on tax reform in the committee process, they’ll also latch on to any path they can find to get legislation over the finish line.

Close to a dozen of the budget conferees — eight Republicans, including Ryan, and three Democrats — also sit on the congressional tax writing panels, meaning there won’t be a lack of interest in tax reform on the panel.

And Baucus this week suggested that lawmakers on both sides of the aisle might be more willing to find common ground after the toxic last month, when the government shut down for more than two weeks, and the country came to the brink of exhausting its borrowing authority.

“I’m hoping that since most senators have not a good taste in their mouth after going through all this, that they’re more likely to try to find an agreement, as challenging as it is,” Baucus told reporters Wednesday.

But there’s also plenty of reason to think that the current budget conference would follow in the footsteps of previous panels and fall short in paving the way for tax reform.

Given recent history, it’s completely possible that Washington lurches from crisis to crisis for the foreseeable future, taking some of the oxygen out of the push for tax reform.

In addition to the budget conference’s December deadline, Congress will have to revisit government funding before Jan. 15 and has suspended the debt limit until February.

Many in Washington are already deeply skeptical that anything can bridge the gap between the two parties on revenue, with Republicans dead set against new tax increases and the Senate Democratic budget calling for $975 billion in new revenue.

Indeed, Republicans still want to slash preferences and incentives to finance cuts in tax rates, having a very aggressive plan to reduce the top corporate and individual rates to 25 percent.

But even before the budget conference was announced this week, top Democrats complained that Republicans were taking tax breaks off the table when it came to deficit reduction.

“Are you really serious about reducing the deficit?” asked Rep. Chris Van Hollen (Md.), the top Democrat on the House Budget panel. “If so, why would you say you can’t reduce a single tax break to do so?”