Nov. 10 (Bloomberg) -- Congressional Republicans and President George W. Bush are divided over whether and how to make an overhaul of the tax code the centerpiece of their agenda in 2006.

Republican congressional leaders don't want to confront voters in an election year with hard choices such as trimming homeownership tax breaks to help abolish the alternative minimum tax, as a presidential panel has recommended, according to strategists. Their uncertainty is magnified by a lack of guidance from Bush's administration, which hasn't commented on its panel's recommendations.

This hesitation is at odds with the ambitions of House Ways and Means Committee Chairman Bill Thomas, who has only one year remaining as head of Congress's most powerful tax-writing panel before he is forced by House Republican rules to vacate his post.

``Thomas is definitely going to want to take it up and try to do something simply because it's his last year as chairman,'' said former Texas Congressman Bill Archer, who was Thomas's predecessor as Ways and Means Committee chairman.

Thomas, who won passage of five tax cuts in Bush's first term, never got a chance to put Bush's Social Security overhaul proposals into legislation. Archer said whether Republican leaders will support Thomas's efforts on taxes will depend entirely on how engaged the administration becomes on the issue.

Bush has said nothing since the panel issued a 272-page report Nov. 1 recommending two ways to overhaul the tax code. The proposals, which would reduce or eliminate many popular deductions while reducing taxes on investment, have been criticized by groups such as the National Association of Realtors, the American Council of Life Insurers and the Bond Market Association, who say their tax breaks may be at risk.

`Tricky'

While Republicans have traditionally been able to win elections by embracing tax reform, such a stance may be difficult in next year's midterm congressional races, said John Feehery, a former spokesman for House Speaker Dennis Hastert who remains close to party leaders. ``It's tricky,'' he said. ``You can't do tax reform without angering some important constituencies.''

Republicans also realize they can't complete a rewrite of the tax code without some cooperation from Democrats. The last major overhaul of the tax code in 1986 required Democrats such as New Jersey Senator Bill Bradley and Ways and Means Committee Chairman Dan Rostenkowski of Illinois to work closely with Republicans such as President Ronald Reagan, Treasury Secretary James Baker and Senate Finance Committee Chairman Bob Packwood of Oregon.

`Trojan Horse'

So far, Democratic leaders such as House Minority Leader Nancy Pelosi have been solidly opposed to the tax panel's proposals. ``President Bush's tax panel is a Trojan horse, using so-called simplification to cut taxes for the wealthy while increasing taxes for middle-class families,'' Pelosi said in a Nov. 1 news release issued 20 minutes before the report was officially presented to Treasury Secretary John Snow.

``There's not any Bill Bradleys out there as far as I can tell, someone who'll reach out to the other side,'' Feehery said.

Since the panel's report was issued, White House spokesman Scott McClellan has reiterated that overhauling the tax code is a priority for the president. Otherwise, he has on several occasions deferred questions to the Treasury Department, which is reshaping the tax panel's proposals into a policy initiative for Bush to champion as early as next year.

The lukewarm reception is in stark contrast to the fanfare with which the president announced the panel's creation in January. Then, Bush introduced panel Chairman Connie Mack and Vice Chairman John Breaux in a ceremony at the White House.

Social Security Panel

The silence also contrasts with the administration's embrace of the findings of the 2001 Presidential Commission to Strengthen Social Security, which Bush used as a basis to promote his unsuccessful proposal to allow workers to invest part of their payroll taxes in investment accounts.

Grover Norquist, head of Americans for Tax Reform, a Washington-based advocacy group with close ties to Republicans, said the administration's low profile was partly caused by its reluctance to talk about tax overhaul as it faced setbacks such as Harriet Miers's withdrawal as a Supreme Court nominee.

``That may be why the administration didn't go out and hug it until they work out the kinks,'' Norquist said.

DeLay's Attack

While the president has kept mum, Texas Representative Tom DeLay assailed the panel's proposals in an opinion article published in the Washington Post on Nov. 4. The recommendations, he wrote, lack ``vision'' and ``boldness.'' DeLay stepped aside as House majority leader in September after a grand jury in Austin, Texas, indicted him on money-laundering and conspiracy charges.

Thomas has reacted favorably to the panel's work. In a Nov. 2 interview, he expressed enthusiasm for proposals to tax employer-provided health benefits over about $11,500 and indicated he was open to ideas to cap tax breaks on homeownership.

Thomas said he wouldn't be bound by the same restrictions as the panel in exploring ways to overhaul the tax code. He said he would consider more radical alternatives, such as a single- rate flat tax, a national sales tax or a European-style Value Added Tax.

The panel rejected all three of those concepts because they didn't meet parameters set by Bush, which included requirements that at least one proposal work within the framework of the current income-tax system and that the proposals raise as much revenue as the current income tax.

No `Preconditions'

``One of the things I think we'll have the Ways and Means Committee do is to not have any preconditions on what we look at in terms of reform tax policy and see what that might produce,'' Thomas said Nov. 2. He dismissed early criticism of the panel's recommendations, saying that ``at some point, everybody has to realize that fundamental tax reform by definition means that everybody's ox gets gored.''

This may be hard to do, given the hesitation of congressional lawmakers and the silence from the White House, Norquist said.

``Thomas has a one-year timeline,'' he said. ``The president has a three-year timeline. Congress has a one-year and a three-year timeline. This is a conflict in the sense that you have to accommodate all three. One doesn't get to win.''

To contact the reporter on this story: Ryan J. Donmoyer in Washington at rdonmoyer@bloomberg.net.

Last Updated: November 10, 2005 00:06 EST