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Camp, House Republicans Consider Testing Tough Politics of Tax Overhaul

Chris Maddaloni/CQ Roll Call File Photo

With the right messaging, a House GOP tax aide said, a tax overhaul bill could “break the mold” of current political discussions. “If we put together a good bill, Democrats are going to have to react to it,” the aide said. “There’s a huge risk of defending the status quo.”

House Republicans were not always so ready to take political risks in tax policy.

After taking control of the House in 2010, Republicans frequently argued that President Barack Obama should make a tax code rewrite a legislative priority for it to have a chance of moving forward.

Obama’s reluctance to do so may have helped change their calculus. But Republicans were also encouraged to see that Democrats have, to some degree, taken cues from Camp as he has pursued a tax overhaul.

Shortly after the Ways and Means Committee in February split into bipartisan working groups that would study different areas of the tax code, Senate Finance Chairman Max Baucus, D-Mont., announced that his panel would undertake a similar exercise.

And since Camp started releasing tax overhaul “discussion drafts” in the fall of 2011, the Obama administration has embraced some of his proposals.

Cues From History

Growing confidence among Republicans also stems from their reading of history.

The landmark tax bill signed by President Ronald Reagan in 1986 is often held up as evidence that controversial tax legislation must be born in the White House or Treasury Department. But GOP aides are drawing a different lesson from that era: that “comprehensive tax reform,” once fleshed out in detail, can quickly gain a life of its own wherever it originates.

In interviews, two veterans of the 1986 overhaul generally agreed with this interpretation.

“If you can convince the public that you’ve actually achieved something with your reform, then you still will fight all the battles over whether this interest group was fairly attacked or not, or whether this particular break should be cut back the way the other ones were,” said Eugene Steuerle, a former Treasury official who helped write the initial proposal that led to the 1986 law. “You’ll still have all those fights, but you’ll change the burden of proof.”

Republicans still have reasons to be concerned. Democrats’ desire to partially replace deep spending cuts currently in effect with a tax increase makes it more likely that they will savage a bill that does not raise additional revenue.

And some Senate Democrats are ready to pounce on a bill if it even gives the impression of favoring the wealthy over middle-income earners.

Republicans, a Senate Democratic leadership aide said, are willing to eliminate tax breaks “that middle-class families depend on, like the mortgage interest deduction and charitable deduction, so they can cut taxes for the rich.”

“It’s almost mind-boggling that they think this is a winning message,” the aide said.

Camp, who has repeatedly said a tax overhaul should attract bipartisan support, faces a stiff challenge in writing legislation that could interest both parties.

“If it appeals to principles on both sides, then I think coming out with a Ways and Means proposal, it gets a lot further,” Steuerle said. “The proof’s in the pudding.”

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