Tax change proposals to set off howls of protest

The changes being proposed will also likely touch off a loud debate in the corporate world. The proposal, if enacted, would change long-standing, fundamental tax rules on business investment.

For example, tax deductions for the cost of a new building or expensive piece of equipment would no longer have to be spread over many years, but could be taken all at once in the year the investment was made. Though corporate tax rates would be pared, companies would no longer be able to deduct interest on corporate debt, a shift that would reduce the appeal of borrowing money in favor of selling new stock. And profits earned on operations based overseas would no longer be subject to U.S. taxes.  

“It will stop companies from thinking about the tax code first and think more about the long business investment,” said the Tax Foundation's Hodge.

But the changes would also upend strategies underlying decades of long-term investment, forcing major changes on some companies that continue to benefit from the current rules.

It’s not at all clear that the latest proposals will ever get past the talking stage. The opening shot in the battle over tax reform two decades ago was fired at the beginning of the Reagan administration’s second term; it still took two years before a compromise was reached. Today, the White House already has its hands full with an unpopular war in Iraq, a criminal indictment against a key aid, a failed bid to overhaul Social Security and a contentious Supreme Court nomination underway.

It also remains to be seen whether a consensus is possible on Capitol Hill, where regional differences may play as important a role as party affiliation. Eliminating deductions for home mortgage interest and state and local tax deductions, for example, would have a bigger impact on taxpayers in states with high taxes and those who live in high-priced housing markets -- regardless of who they vote for.

The debate over the 1986 law was contentious from the beginning, but eventually yielded to bipartisan compromise negotiated by former representative Dan Rostenkowski, the powerful Illinois Democrat, who chaired the House Ways and Means Committee, and former Sen. Robert Packwood, a Republican from Oregon who headed the Senate Finance Committee. Today, with Senate Majority Leader Bill Frist under investigation for insider stock trading, and the House leadership in limbo following former Majority Leader Tom Delay’s indictment on charges of money laundering and conspiracy, it remains to be seen whether the Congressional leadership can tame the hoard of interests that are expected to turn out in force to protect the status quo.

MSNBC.com's Martin Wolk contributed to this report.

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