The leadership of the U.S. Senate Finance Committee is asking their fellow senators what tax deductions should be preserved in the event of a major overhaul of the federal tax code.

On June 27, 2013 Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking Republican Orrin Hatch (R-Utah) sent a joint letter to the other 98 senators asking for their “ideas and partnership to get tax reform over the finish line.” The committee has been evaluating options for tax reform this year. A copy of the joint letter is available here.

The committee leaders wrote that they would start with a “blank slate” tax code that does not include any tax deductions or special preferences. Senators have until July 26 to submit legislative language or detailed proposals for the way in which tax expenditures should be added back to the tax code. Bipartisan proposals will receive special attention.

According to the letter, senators will have to justify inclusion of their preferred tax expenditures and demonstrate how they improve the tax code:

“To make sure that we clear out all the unproductive provisions and simplify in tax reform, we plan to operate from an assumption that all special provisions are out unless there is clear evidence that they: (1) help grow the economy, (2) make the tax code fairer, or (3) effectively promote other important policy objectives.”

Baucus and Hatch added in the letter that eliminating tax expenditures allows for significant tax rate reduction and that senators should keep in mind that expenditures added back to the blank slate tax code would increase tax brackets for individuals and corporations. In other words, senators will have to choose between lower tax rates and popular tax breaks.

Several lawmakers have already defended certain tax expenditures, such as the home-mortgage interest deduction and tax deductions for charitable contributions – two of the most expensive tax breaks. The Congressional Budget Office estimates that the mortgage interest deduction will cost the government roughly $70 billion in 2013, while charitable deductions will cost $39 billion. A copy of the Congressional Budget Office report is available here.

The Finance Committee has been meeting regularly this year to discuss tax reform and has released 10 white papers exploring tax reform options for specific topics within the tax code debate. The Finance Committee white papers are available here.

Baucus is retiring from the Senate at the end of his term in 2014 and has repeatedly told reporters that he is committed to passing tax reform legislation this year.

Baucus’ counterpart in the U.S. House of Representatives, Ways and Means Committee Chairman Dave Camp (R-Mich.), has also indicated his commitment to passing tax reform legislation this year. Camp is term-limited out of chairing the influential tax-writing committee after 2014. Camp issued a statement expressing support for the Finance Committee leaders’ letter and stated that “the Senate and House are on the same page as they work in a bicameral, bipartisan manner to fix our broken tax code.” In addition, Erskine Bowles and Alan Simpson, authors of the widely discussed tax and budget plan bearing their names, issued a statement supporting the Finance Committee leaders’ blank slate approach to tax reform.

Baucus and Camp have been meeting weekly to discuss tax reform — a rare collaboration between House and Senate leaders. They plan to travel around the country this summer to build public support for congressional tax reform efforts.

Notwithstanding the best intentions of Chairmen Baucus and Camp, enactment of a tax reform bill in the current Congress will be an arduous task. In 1985-86 when the last major tax reform bill was enacted, there was broad consensus between President Reagan, the Democratic-controlled House, and the Republican-controlled Senate on what the tax reform bill should look like. There is no such consensus between the Democrats and Republicans now. To pass a tax reform bill in this environment will require a lot of compromise by both political parties and the bases of both parties seem resistant to compromise.