海角大神

If Congress is going to reform the tax code, it will take an enormous amount of hard work and a lot of luck. The stars, as they say, will have to聽align. Unfortunately, those galactic bodies seem to be getting more and more disarranged.

Reform just can鈥檛 catch a break. The deficit is shrinking, taking away one possible driver of a rewrite. The Congressional Budget Office now projects the nation won鈥檛 bump up against its debt limit until October or even November, taking even more steam out of any Grand Bargain鈥攐r even a not-so-grand deal. 聽And pols seem unable to disentangle themselves from distracting sideshows such as the IRS tea party flap.

Some have argued that these events make reform easier, not harder. The IRS scandal, they say, will encourage bipartisan compromise. Without immediate deficit pressures, Democrats would be more willing to accept a deal that raises the same amount of money as the current code and not insist on a reform that raises revenue.

I don鈥檛 think so.

Wednesday, House Ways & Means Committee Chairman Dave Camp (R-MI) gave an important update on tax reform聽to a group of Washington tax wonks. Yet his聽talk聽got almost no attention. The headlines came from what he said to reporters after the event. The Hill鈥檚 was typical: 鈥淲ays and Means Chairman: IRS targeting of Tea Party groups didn鈥檛 start in Ohio.鈥�

Tax reform? What tax reform?

Camp is trapped. He has to keep talking about the IRS kerfuffle because reporters keep asking and because, as a Republican, his own caucus wants him to. But I suspect he鈥檚 well aware of how the issue is sucking the life out of his reform agenda.

Even if few noticed, Camp鈥檚 talk was pretty interesting, as much for what it didn鈥檛 say as for what it did.

All of his focus was on simplification鈥攕traight from the spring cleaning hymnal that he and Senate Finance Committee Chairman Max Baucus (D-MT) have been singing from lately. Not a word in Camp鈥檚 remarks about the benefits of low rates. Just simplification for its own sake.

Nothing wrong with that, of course. And in today鈥檚 political environment a simplification bill would be a real achievement. But it won鈥檛 be major base-broadening, rate cutting tax reform.

Camp gave a couple of examples:聽 the complexity of international tax and the 15 different subsidies for higher education.

He might be able to work something out on education. International taxation will be much harder. And any housecleaning that upsets the status quo will always be a challenge.

Camp, for example, has incurred the ire of Wall Street for proposing to simplify the tax treatment of some investment vehicles. This generated a story in the New York Post headlined聽 鈥淭he Most Feared Man on Wall Street.鈥�

Wall Street lobbyists say they object to Camp鈥檚 proposal to change the tax treatment of some options, such as covered calls. This, they say, will hurt ordinary investors.聽But ordinary investors don鈥檛 play the options market. And the pros really are worried about having to mark-to-market their own derivatives positions, as my Tax Policy Center colleague Steve Rosenthal described earlier this year.

The Street will put on a full-court press to kill this idea. And if history is a guide, it will succeed.

If Camp and Baucus are going to get even simplification-type reform this year, they will need to catch a break or two. And so far, at least, they鈥檝e gone cold.