WASHINGTON (Reuters) - Grover Norquist, the influential anti-tax activist, on Wednesday threw his support behind the latest bid by Senate tax writers to overhaul the U.S. tax code. But he added caveats that highlight the challenges lawmakers face in their quest.
Senate Finance Committee Chairman Max Baucus, a Democrat, and the panel’s top Republican, Senator Orrin Hatch, proposed last month to scrap all tax breaks and start fresh in an effort to simplify the code and lower tax rates.
Their pitch to senators: if you want to put a tax break back into the code, make a convincing case for it before July 26.
After that, Senate tax writers would spend coming months drafting a bill for possible introduction after Congress returns from its August recess.
“I write today to support the ‘blank slate’ approach to tax reform,” Norquist said in a letter to Hatch.
The Baucus-Hatch effort faces tough odds, in large part because Democrats and Republicans disagree on whether an overhaul should raise new tax revenue.
Some party leaders and other lawmakers are also skeptical about identifying politically popular tax breaks to nix for legislation that is uncertain to move in the near term.
Baucus and most Democrats say the government needs new revenue. They say not all the money gained by scrapping tax breaks should go to lowering tax rates. Most Republicans, including Norquist, take the opposite view.
“A revenue-neutral reform target is an absolutely essential precondition to any tax reform,” Norquist wrote. “Tax reform should not be a stalking horse for a net tax increase.”
Norquist, president of Americans for Tax Reform, listed several other steps senators should take including eliminating taxes on capital gains and dividends, a move not backed by most Democrats.
Reporting By Kim Dixon; Editing by Xavier Briand