Obama: Let's 'revamp' our taxes

January 21, 2013: 6:25 PM ET
Obama inaugural speech: Economy in 99 secs
NEW YORK (CNNMoney)

Ronald Reagan did it. George W. Bush did it. On Monday, Barack Obama did it.

Each president used an inaugural address to herald his intent to push tax changes during his term. Reagan and Bush were successful, but experts say Obama faces high hurdles to achieve the tax code revamp he has in mind.

Still, the mention signals that Obama is not giving up on his desire to require tax revenue hikes to balance any spending cuts Republicans will demand in the looming deficit reduction battles.

But Obama and the GOP also have different ideas on revamping the tax code. Republicans want to lighten the burden on businesses and on the wealthy, who they argue are job creators. Obama, on the other hand, wants to cut tax breaks for high-income Americans and eliminate certain corporate loopholes. This comes after the two sides agreed to raise taxes on the rich as part of the fiscal cliff deal.

"The Republicans want different things than Democrats want out of tax reform," said Mark Luscombe, principal analyst at tax research firm CCH. "It will be hard to bridge the gap."

Whether the two sides will be able to forge an agreement remains to be seen. Today's atmosphere in Washington is far more polarized than it was when Bush and Reagan pushed their tax overhauls through.

Related: Obama's economy

Obama does not have advantages that his predecessors did. Unlike Reagan, he does not share a broad consensus with lawmakers on how much money needs to be raised and who should pay for it. The 1986 tax reform lowered rates across the board, but raised the capital gains levy to 28%, closed tax shelters and shifted part of the tax burden to corporations by eliminating a popular business credit.

And Obama will probably not have an assist from the likes of Alan Greenspan, then chair of the Federal Reserve, whose testimony helped sway Senate Democrats to support the 2001 Bush tax cuts in a time of budget surpluses.

That's likely why Obama touched on it in his address, which hit hard on another of his themes: protecting the middle class and eliminating income inequality.

"For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it," he said. "So we must ... revamp our tax code, reform our schools, and empower our citizens with the skills they need to work harder, learn more, reach higher."

The speech allowed the president to once again connect tax changes with leveling the playing field.

"It's a way for him to talk about income inequality that Republicans have to listen to in the first instance because it's about tax reform," said Clint Stretch, a Washington tax expert. "At least it gets the conversation started."

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