By Matthew Rusling
WASHINGTON, Aug. 13 (Xinhua) -- While an argument for tax reform is beginning to take shape in Washington, political analysts and prognosticators said any significant tax overhaul is a long way off.
In a bid to spark the sluggish U.S. economy back to life, President Barack Obama in recent weeks said he was willing to work with Republicans to lower corporate tax rates, stopping short of extending a plan for tax relief to individuals.
But analysts said Republicans are unlikely to pass any such legislation unless it amounts to a full-on tax overhaul that cuts rates for start-ups and small businesses, as well as individuals. The disagreement is just the latest amid ongoing partisan rivalry so characteristic of Congress in recent years.
"The way the president's plan is constructed, I see it as very hard for Republicans to pass it," Republican strategist Ford O'Connell told Xinhua, adding that the GOP may wait until after the mid-term elections to tackle the issue, when the party expects to win more seats in Congress.
Four years into the U.S. economic recovery, unemployment remains high, and economists said that at current rates, the jobless rate will take several years to return to pre-recession levels. Adding to the crisis, last quarter's GDP grew at a paltry 1.7 percent.
In an interview earlier this month with Fox News, former GOP vice presidential candidate Paul Ryan blasted Obama's tax reform plan as crony capitalism, arguing that the top effective individual tax rate stands at 44.6 percent.
He echoed others who believe simply giving corporations a tax break would shift the tax burden to the middle class and small businesses.
Andy Busch, editor and publisher of the Busch Update, a financial and political newsletter, argued that the current recovery is the worst since the Great Depression, echoing other analysts who note that most other recoveries saw the economy bounce back within two years.
"The best thing (the Obama administration) could do is get solidly and aggressively behind tax reform," Busch, formerly a global currency and public policy strategist at BMO Capital Markets, told Xinhua.
"For tax reform to happen, it needs a leader, beyond Congressional leaders," he contended.
"That's the easiest thing to do as far as positively impacting the economy, but it's more difficult because of the political chips you have to call in to actually get it done," he argued.
"This is something that the rest of the world is already doing and we are woefully behind," he said.
Economists note that getting the U.S. growth engine roaring again would benefit countries worldwide, including China, as a stronger U.S. economy would mean Americans would have more cash on hand to purchase imported goods.
Forking over large chunks of their income to Uncle Sam is a constant complaint among many middle class Americans, many of whom say high taxes have caused them to postpone big-ticket purchases such as houses and cars.
Flattening the tax rate and eliminating loopholes would take the distortion out of business decisions, boost the economy's efficiency and help companies increase revenue, said Diane Swonk, chief economist at Mesirow Financial.
"That's important because it means more efficient business decisions and less gaming of the tax code," she told Xinhua, adding that it applies particularly to manufacturers.