Taxation Of Businesses

Differences also emerged as to how multinational businesses are taxed. Boehner proposed moving the U.S. toward a system that would tax only income earned domestically, while Obama's team didn't embrace that idea, the people said.

Boehner's team was concerned that businesses that operate as pass-through entities, whose owners pay taxes on their individual returns, would lose out in the overhaul. They were worried that some of these businesses would lose deductions or face higher taxation as so-called C corporations. Republicans say such moves would hurt small businesses.

"When you actually try to design a plan, there's no way that you can keep everybody equal," said former Representative Bill Archer of Texas, a Republican who headed the Ways and Means Committee from 1995 to 2000. "And so the losers then say, 'Well, wait a minute. That's not what I meant by tax reform.' And it is extremely difficult to do."

Archer, now a senior policy adviser at PricewaterhouseCoopers LLP in Washington, said large companies represented by the accounting firm are already concerned about potential trade-offs.

'Scared To Death'

"There's a bunch of them that are scared to death about what revenue-neutral tax reform means for them," he said.

Obama laid out some of his preferred parameters at a news conference yesterday. He said he wants to eliminate tax benefits for "corporate jet owners or oil companies" starting in 2013 and raise taxes on taxpayers such as himself. Obama and his wife, Michelle, reported $1.7 million in adjusted gross income for 2010, mostly from sales of his books.

"And what I've also said to Republicans is, if you don't like that formulation, then I'm happy to work with you on tax reform that could potentially lower everybody's rates and broaden the base, as long as that package was sufficiently progressive so that we weren't balancing the budget on the backs of middle-class families and working-class families, and we weren't letting hedge fund managers or authors of best-selling books off the hook," he said.

Boehner, an Ohio Republican, said at his own news conference yesterday that he had a "big conversation" with the administration about revenue in the context of a tax overhaul. He reiterated that Republicans won't support a tax increase.