U.S. Senate tax-writers aim for code revamp bill by year's end
WASHINGTON, June 27 (Reuters) - The Senate's top Democratic and Republican tax-writers, undertaking a rewrite of the U.S. tax code, on Thursday challenged their Senate colleagues to justify keeping popular tax breaks, with the aim of debating legislation after the August recess.
Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and the committee's top Republican, Orrin Hatch of Utah, wrote lawmakers in a "dear colleague" letter that they were starting with a "blank slate."
That means starting to draft a bill based on a tax code with unspecified, perhaps substantially, lower rates and none of hundreds of tax breaks that are embedded in the code now, according to the letter.
The duo gave lawmakers until July 26 to make their arguments to put so-called tax expenditures - from the politically popular mortgage interest deduction to business breaks such as the research and development tax credit - into the bill.
Tax breaks like these cost the U.S. government more than $1 trillion a year. After three years and dozens of congressional hearings about overhauling the code, Baucus and Hatch said to their colleagues: "Now it is your turn ... We need your ideas and partnership to get tax reform over the finish line."
The aim is to debate legislation when Congress returns in September from its summer recess. Passing a bill in this Congress, which ends at the end of 2014, is the goal, aides said.
Personal income tax rates range from 10 percent to 40 percent. The top corporate income tax rate is 35 percent.
Baucus' counterpart in the U.S. House of Representatives, Republican Dave Camp of Michigan, has pledged to pass legislation this year out of his tax-writing House Ways and Means Committee.
Camp's aim is to cut the top rates to 25 percent, though there is some debate among Democrats and experts about how feasible that is, given the support for many tax breaks.
Baucus and Hatch are not setting a goal on rates.
A major stumbling block remains. Democrats and Republicans largely concur on the need to revamp the outdated tax code, but they differ on whether new revenue should be raised and which tax breaks should be scrapped for lower rates.
Indeed, they sidestepped the question of whether any revenue raised from eliminating breaks should be used for deficit reduction, or if all of it should be used to trim rates.
Despite the enthusiasm of tax-writing lawmakers, congressional leaders of both parties have been wary, largely due to these divisions.
Corporate lobbyists had been abuzz about the effort all week. They have been forming alliances for the past year to make the case for their particular interests.