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Tax code overhaul may wait until 2007

Bush may not share specifics in state address

WASHINGTON -- The White House may delay unveiling a broad proposal to overhaul the tax code until 2007 or later, despite earlier discussions of making it a major theme for next year, people close to the White House said.

A panel named by President Bush has recommended sweeping changes to the tax code, including reducing deductions for home mortgages and state and local taxes.

Bush is having the Treasury Department review the recommendations and submit a plan to him.

The White House had initially considered having Treasury prepare a plan by the end of the year that could form the basis for a proposal in Bush's State of the Union address.

But several Republicans with close administration ties said it now seems likely that Bush may only speak generally about tax reform in the address and not unveil specifics.

''I don't think there is enough time to churn out a policy," said one Republican, who spoke on condition of anonymity.

Time magazine, in its latest edition, quoted a White House official as expressing doubt that a major proposal to change the tax code could attract Democratic support in a midterm election year.

''No one wants to put something out there that's not going to go anywhere," the magazine cited a White House official as saying.

The Republican source who spoke to Reuters noted that several elements of the tax panel's recommendations, most notably the proposed cut in the home mortgage deduction, are controversial, and making major revisions to the commission's report might take a great deal of time.

The position at Treasury that would normally serve as a clearinghouse for such efforts -- the assistant secretary for tax policy -- has been vacant for several months. ''There is not the manpower to do it," the Republican source said.

In addition to curbing deductions like those for home mortgages, the commission also proposed limits on the tax-preferred status of employer-provided health insurance.

The commission also recommended reducing the number of tax brackets and eliminating the alternative minimum tax, a parallel tax system that increasingly hits middle-class taxpayers.

A second Republican who spoke to Reuters on condition of anonymity said the White House was not ''at loggerheads" with the commission over its findings, but there is a belief that an election year was not the best time to sell the public on such a detailed initiative.

''The complexity would turn people off," the source said.

Many Republicans are wary of embracing a controversial and complex initiative after Bush's drive to overhaul Social Security proved unpopular.

Treasury Secretary John Snow said in late October that he hoped to present his findings on tax changes to Bush by the end of the year, but the administration more recently has been noncommittal on the timing of the tax initiative.

''The timing is unclear," Al Hubbard, White House economic adviser, told reporters Friday. ''In terms of priorities for next year, that's up -- I'm going to leave it up to him to share his priorities with the American people."