Wall Street Journal
March 22, 2013

Bipartisan Duo Shapes Contours of Tax Deal

Republican Rep. Camp and Democratic Sen. Baucus Are Ready to Pounce If Broad Overhaul Is Part of Any 'Grand Bargain'

While other lawmakers have spent much of the past two years squabbling over taxes, Republican Rep. Dave Camp and Democratic Sen. Max Baucus have been laying the groundwork to transform them.

Now, the chairmen of Congress's two tax-writing committees are preparing to strike if the moment arrives to try to achieve their shared goal: passing a sweeping overhaul of the U.S. tax system.

The possibility of such a moment has glimmered in recent weeks as President Barack Obama tries to restart talks about a so-called grand bargain deficit-reduction agreement that might include a tax-code revamp.

While the odds of achieving a deal remain long, Mr. Camp of Michigan, chairman of the House Ways and Means Committee, and Mr. Baucus of Montana, chairman of the Senate Finance Committee, are moving forward on their own.

The two have met to discuss the subject nearly every week for the past two years—continuing conversations even while Mr. Camp was being treated last year for early-stage lymphoma. They have held joint hearings and are expected soon to launch a joint effort to generate public support for a tax-code rewrite.

Mr. Camp is further along in the process. He has rolled out three draft bills that would affect the taxes on international commerce, small businesses and sophisticated financial products such as derivatives. Although he hasn't formally introduced the legislation in the House, he hopes the drafts will generate discussion and eventually become the basis for legislation.

Mr. Baucus hasn't commented on Mr. Camp's drafts, but he is working with members of his own committee to put together discussion papers on the big issues and has begun holding bipartisan meetings on various tax-overhaul topics.

The two men use similar language to describe the broad goals of a tax overhaul—making the system simpler and fairer, with lower rates and fewer loopholes, which they believe would boost the economy and generate jobs. Less clear is whether they could agree on the difficult details of such changes.

Mr. Camp wants to reduce the top individual and corporate tax rates to 25%, from 39.6% and 35%, respectively. Mr. Baucus has been less specific about his goals for rates, though he has said he wants them lowered. Both say they want to curb some tax breaks, though neither has said which ones.

One area of clear divergence is over whether to raise total tax revenue to reduce deficits: Echoing their party leaders' positions, Mr. Baucus is in favor, while Mr. Camp is against.

At first glance, the long-serving Democrat and his veteran Republican counterpart would appear to be unlikely allies. But at a time of rancorous partisan sniping across Capitol Hill, they have found an unusual patch of common ground.

They came close to reaching an agreement in principle on a tax overhaul while serving together on a so-called congressional supercommittee that sought ways to cut the federal deficit in 2011. They have sat together at State of the Union speeches. And each describes the other in similar ways, as someone he trusts and can work with.

"As a Montanan who represents small communities, I know that business gets done meeting face to face and over a handshake, and Dave understands that," Mr. Baucus said in a statement. "We may be from different political parties but we share the same goal—to create jobs and spark economic growth, which is why we've been able to work together time and time again to get things done."

Mr. Camp said in a statement, "One of the things I most appreciate about Max is that he is a straight shooter who is focused on finding solutions.…We both share a goal of reforming the tax code so that it is simpler and fairer and spurs investment, job creation and higher wages at home. Max is a committed partner in that effort."

Over the years, both men have demonstrated an ability to strike deals across the aisle.

Mr. Camp "looks for ways to get something done," said Russ Sullivan, Mr. Baucus's former top committee aide. "I've sat and listened to him outline the various views of his members, and seen him try to thread something that could work."

Mr. Baucus, who is known as a pragmatist and who gets relatively high marks from business groups, views himself as an heir to the mantle of Democrat Mike Mansfield, the long-serving Senate majority leader from Montana who was known for his skills at finding compromise.

Mr. Baucus "knows we need tax reform," said Sen. Charles Grassley (R., Iowa), the former Finance Committee chairman. "He's a Mansfield disciple who thinks the U.S. Senate ought to function."

It may also help that both men are familiar with distance events: Mr. Baucus has completed an ultramarathon, while Mr. Camp was once a competitive swimmer.

Largely because of them, "the stars are aligned for tax reform in a way that they've not been aligned in the last 20 years or so," Assistant Treasury Secretary Mark Mazur said at a recent tax conference.

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