Bipartisan Tax Overhaul Faces Uphill Battle

Republican Sen. Judd Gregg and Democrat Sen. Ron Wyden i i

Republican Sen. Judd Gregg and Democrat Sen. Ron Wyden have teamed up to push a bipartisan rewrite of the tax code. Susan Walsh/AP hide caption

itoggle caption Susan Walsh/AP
Republican Sen. Judd Gregg and Democrat Sen. Ron Wyden

Republican Sen. Judd Gregg and Democrat Sen. Ron Wyden have teamed up to push a bipartisan rewrite of the tax code.

Susan Walsh/AP

Part of a series on tax policy

It's been nearly a quarter century since former Democratic Sen. Bill Bradley teamed up with Republican President Ronald Reagan to push through the biggest overhaul ever of the nation's tax code. Since then, more than 15,000 provisions have been crammed into the code, and a once relatively simple set of tax laws has again grown mind-numbingly complex.

Two senators — Democrat Ron Wyden of Oregon and Republican Judd Gregg of New Hampshire — have launched a new bipartisan attempt to simplify the tax code.

Earlier this year at a news conference on their effort, Wyden said the two lawmakers worked together for two years on a revamping of the bloated tax code.

"We want to show, with a code with 10,000 sections, 3.7 million words, that this system is broken. It is a broken tax code," Wyden said.

He said Americans now spend billions of hours each year on their taxes and nearly $200 billion making sure they comply with tax laws.

The tax code is easy to bash, but efforts to revamp the system have proved that it's a real political minefield. Here, a closer look at past simplification attempts.

"So what we're trying to do is draw a line in the sand and say that we want to make filling out your taxes something that a human being can actually do," Wyden said.

To do that, Wyden and Gregg proposed shrinking the number of lines on the 1040 tax return form from 76 to 30; they would get rid of scores of loopholes, including one that allows people to deduct punitive damages paid in a lawsuit; and instead of the current 35 percent corporate tax rate, they called for a flat 24 percent rate to encourage companies to stay in the U.S. and hire more Americans. Gregg said what's most important about the measure is that it's bipartisan.

"I mean, it's sort of unique around here to have senators from both sides of the aisle stepping forward with a major proposal, which is extraordinarily expansive on one of the core issues of policy, which is tax policy. And we see that in and of itself as being a positive step, but more importantly, if people look at the actual proposal, they're gonna say, 'Wow, my goodness, this is an idea that makes sense,' " Gregg said.

And leading lawmakers do agree the current tax code is unfair and obsolete.

"It's increasingly clear to me that we need fundamental tax reform," said Senate Budget Committee Chairman Kent Conrad (D-ND).

Senate Finance Committee Chair Max Baucus (D-MT) echoed the sentiment.

"Clearly, we need reform. There's no doubt about that," he said.

Baucus has not yet held a hearing on the Gregg-Wyden proposal. That did not keep Wyden from talking it up at a recent Finance Committee hearing on the Bush-era tax cuts that expire this year.

"Democrats and Republicans can come together and take a machete to the preferences, this blizzard of deductions and exemptions and credits," Wyden said.

That was met by a bit of skepticism from one of the hearing's witnesses, tax expert Leonard Burman of Syracuse University. "Taking a machete at preferences I think is a great idea, but you know better than I do how hard that is, because there's such a strong constituency for every one of those," Burman said.

There was also this advice on how to proceed from Douglas Holtz-Eakin, the head of the Congressional Budget Office under President George W. Bush.

"The best way to get to something like Wyden-Gregg or a tax reform that a tax economist would be proud of would be to lock the business community out of the room," Holtz-Eakin said.

But that won't happen, according to Sen. Bernie Sanders (I-VT).

"Does anybody in their right mind think that you're going to have equitable tax reform here in Washington where we're going to be descended on by all kinds of lobbyists, representing the wealthiest people and loopholes they're gonna put in? It ain't gonna happen!" Sanders said.

George Washington University congressional expert Sarah Binder says several things have stood in the way of overhauling the tax code. One is a shortage of moderates on Capitol Hill for a bipartisan coalition. Another is that Congress has been tied up with too many other issues.

"This wasn't time to grab ... attention on the House or Senate floor, and I think [that] the longer proposals sort of linger out there, [there is a risk of] losing the enthusiasm for them — certainly risk losing Gregg as a driver," Binder says.

That's because Gregg is retiring at the end of the year. Still, he hasn't given up hope on his proposed overhaul.

"I do believe that the opportunity is sitting there if the Congress ... has the courage to step up and address it," Gregg says. "Now, can it be done in the context of an election and then a lame duck? Unlikely."

And not likely by next April 15, either.

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