As Treasury Secretary Paul H. O'Neill prepares to draft a model proposal for overhauling the U.S. tax code, most political and industry observers agree the task will be daunting. For the last few months, Secretary O'Neill has fielded input from tax experts from universities and research institutes on ways to simplify the existing tax system. One key issue the plan will concentrate on is whether the tax liability for wealthy taxpayers should be more than for lower-income people. President Bush is working to make permanent the 10-year, $1.35 trillion tax cut enacted last year in Congress, and may propose new tax cuts to boost the economy early next year.