From President Obama to House Speaker John A. Boehner, there’s broad consensus that Congress needs to unclutter the federal tax code and remove the special breaks that litter its 70,000 pages — but Thursday’s dry run in a Senate committee showed just how tough it will be to slash.
The Finance Committee voted to renew 51 special tax breaks for another year and to raise the level of a tax designed to hit the wealthy, at a cost of more than $205 billion — all of it tacked onto the deficit.
Sen. Max Baucus, Montana Democrat and chairman of the committee, said that counted as progress — 21 other special tax breaks could have been included but weren’t.
“This bill is a good first step,” he told his colleagues.
But Republicans said that if it was a dry run for next year, it was a failure.
“I hope it’s not. When everybody starts talking about how great tax reform will be but then they don’t have the appetite to deal with them now, it’s not a great start,” said Sen. John Cornyn, Texas Republican.
Tax reform was supposed to be one area where Mr. Obama and House Republicans could agree to work on over the past two years.
But it has fallen by the wayside as Capitol Hill has fought over spending and the narrow question of what to do with the Bush-era tax cuts, which expire at the end of this year.
Now, even as those other two issues are unresolved, all sides are promising yet again to tackle the tax code — next year.
House Republicans on Thursday passed a bill that amounts to a down payment, at least, on the process. The bill creates expedited rules for getting a tax overhaul onto the chamber floor, and also requires that it meet special conditions such as keeping total government revenue to less than 20 percent of the gross domestic product.
Restrictions like that make the bill a nonstarter in the Senate.
Tax reform is expected to address both the overall tax rates and the hundreds of credits and deductions that taxpayers use to shelter some of their income from the Internal Revenue Service.
More than 100 of those tax breaks are due to expire each year, and Congress acts regularly to extend them — which is what the Senate Finance Committee was dealing with Thursday, in an annual exercise known as the “tax extenders.”
Under pressure from all sides, Mr. Baucus culled the list of extenders by more than 20, sending his colleagues a draft Tuesday that cost $151.7 billion, of which $92 billion was to raise the point at which taxpayers get hit by the alternative minimum tax.
By Thursday morning, however, staffers said Mr. Baucus had been persuaded to add more than $50 billion in extra tax breaks, including $40 billion for a two-year extension of the alternative minimum tax, which was designed to make sure the wealthy paid taxes but increasingly catches upper-middle-class taxpayers.