WASHINGTON — An overhaul of the nation's tax code should raise additional revenue to reduce massive budget deficits and should help strengthen the economy, the Senate's top tax-writer said Monday.
Though he provided almost no detail, the stance by Sen. Max Baucus, D-Mont., that rewriting tax laws should be a part of deficit reduction underscored the differences between the two parties. Many Republicans say a tax overhaul should involve lower rates and fewer tax loopholes without producing extra revenue to erase red ink.
"Any tax reform plan must be developed with a sound budget in mind that reduces deficits and debt," Baucus said in remarks at the Bipartisan Policy Center, a policy research organization driven by moderates from both parties.
Baucus conceded that any tax overhaul would probably have to wait until after the November elections because partisanship is too strong now, a widely held view in Washington.
He also said he believes lawmakers will first have to deal with the year-end "fiscal cliff," when billions in tax cuts will expire and billions more in automatic spending cuts will start taking effect unless Congress acts.
Republicans want to renew broad tax cuts, first enacted under President George W. Bush, for everyone. President Barack Obama and many Democrats want to let the Bush tax cuts expire only for people earning over $250,000 yearly, though some Democrats want to raise that threshold to $1 million.
In an important tonal contrast with Republicans, Baucus said while he favors eliminating tax breaks to lower overall tax rates, "some of that's a little unrealistic politically" because of the popularity of many parts of the current tax code.
Republicans have already pushed a budget through the House that would create just two tax rates, 25 percent and 10 percent, down from the current five rates that top out at 35 percent.
It would be paid for by eliminating tax breaks, but Republicans have not specified which ones they would terminate, though they have asserted they could achieve their goal. Two of the largest breaks are the home mortgage interest deduction and the exclusion from taxes of the value of employer-provided health insurance, both of which are widely and intensely popular.
Baucus also said that dozens of narrow tax breaks – mostly for businesses – that have expired or will soon expire should not be renewed unless they have "a tangible benefit to our economy or society."
He said the goals of rewriting tax laws should be to help create jobs, make U.S. companies more competitive and innovative, and encourage more education and opportunity.