Prospects for tax reform in Congress are in limbo because of a fight over whether the effort should raise revenue to reduce the deficit.

The dispute has held action by the Senate Finance Committee, which has not begun preliminary work on overhauling the tax code.

Senate Majority Leader Harry Reid (D-NV) is undecided as to whether it should proceed if Republicans do not agree up front on how much revenue should go to deficit reduction.

Many Democrats are eager to get moving on legislation to raise hundreds of billions of dollars in new revenues through tax reform, but Senate Finance Committee Chairman Max Baucus (D-MT), is reluctant to move legislation out of his committee that does not have bipartisan support.

Reid said the Democrat Caucus would have several more discussions before deciding to move tax reform without an agreement with Republicans to set aside a portion of the revenues to cut the deficit...

Baucus says his panel can begin to explore ways to broaden the tax base, but the heavy lifting for tax reform will hinge on reaching agreement with Republicans on how much of the tax revenues raised to devote to shrinking the deficit.

"That question has to be resolved," Baucus said before qualifying his answer. "The more that's resolved, the more we're going to get successful tax reform."

The biggest obstacle to tax reform is that both parties are at a stalemate on the question of what to do with new revenues.

The Senate Democrat budget would devote $975 billion in revenues raised through tax reform to pay down the deficit. House Republicans want to keep tax reform revenue-neutral. They say any savings from limiting deductions and exemptions should be used to lower individual and corporate tax rates...

The House Ways and Means Committee has already unveiled three drafts on international tax reform, financial products and pass-through and small-business entities that could be quickly merged into a broad legislative package...

Some Democrat leaders want to get started on tax reform, even without an up-front agreement on a revenue goal. But it's unclear whether they envision only the preliminary groundwork Baucus has in mind or more meaty action...

The GOP leadership aide said Baucus has a very different view of tax reform than Sens. Durbin and Schumer.

"There's a zero point zero percent chance that Baucus moves ahead with tax reform," said the aide. "He's not where the rest of the members of his caucus are, where they want a big tax increase. He wants revenue-neutral tax reform"...

Baucus, however, wants to pass a tax-reform bill out of the Finance Committee that has Republican support. "It's a big help. That's my goal," he said.

Baucus made clear to Democrat leaders earlier this year that he was not happy about the reconciliation instructions included in the budget ordering his panel to raise hundreds of billions of dollars in new tax revenues. Under reconciliation, such an overhaul of the tax code could pass the Senate with a simple majority vote -- but the Senate and House would have to reach a joint budget resolution to empower it.

Sen. Orrin Hatch (Utah), the senior Republican on Finance, blasted the Democrat budget. "You can't simply say we want the Finance Committee to figure out how to raise taxes by another trillion dollars to finance our spending spree," he said. "That is irresponsible and, like I said, it poisons the well for fundamental tax reform."

READ FULL SOURCE ARTICLE: 03/22/2013