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Senate panel chief to detail tax code vision

U.S. Senator Max Baucus (D-MT) (C) talks to reporters after meeting with his fellow Democratic members of the 'super committee' at the U.S.
U.S. Senator Max Baucus (D-MT) (C) talks to reporters after meeting with his fellow Democratic members of the 'super committee' at the U.S.

By Kim Dixon

WASHINGTON (Reuters) - The chairman of the Senate tax-writing committee promised to spell out ideas for revamping the tortuous tax code next Monday, providing a glimpse of the influential lawmaker's plan for major fiscal decisions looming at the end of the year.

Senator Max Baucus, the Finance Committee chairman, will deliver "a vision for tax reform" on June 11 at the Bipartisan Policy Center, his office said.

Democratic President Barack Obama and most lawmakers from both major political parties say they want a tax code overhaul, generally defined as a lowering of rates coupled with a narrowing of specialized tax breaks.

The devil will be in the details, such as how low to trim rates, which tax breaks to curb, and whether a revamp will raise revenue or not.

While tax reform is expected to take years, several deadlines at the end of the year will force action on some items - particularly expiring individual tax rates enacted under former president George W. Bush in 2001 and extended under Obama.

Democrats and liberal groups are in a minor scuffle over that issue after House Democratic leader Nancy Pelosi called for a vote on extending historically low individual tax rates for only those with income of less than $1 million.

Obama and nearly all Democrats have taken the stance that the wealthy can afford to pay more in taxes, and have called for letting lower rates lapse for households earning $250,000 or more.

"This could be meaningful if Baucus says where the red line is for him," said Helen Fessenden, an investor analyst who watches Congress for Eurasia Group.

All of the lower individual tax rates expire at the end of the year unless Congress acts. Action is not expected until after the November 6 presidential and congressional elections.

Baucus, a moderate Democrat from Montana, has been holding hearings for more than a year on the topic, but has not spoken extensively on it. He is up for re-election in 2014.

He will deliver a speech to the Bipartisan Policy Center, a think tank founded by former Republican Senator Pete Domenici and Democratic budget expert Alice Rivlin.

The BPC has called for cutting top individual rates from 35 percent to 28 percent, and trimming the top corporate rate from 35 percent to 28 percent. Their plan also curbs housing and charitable contributions deductions for the wealthy.

BIGGER PICTURE

Baucus's committee has responsibility over tax policy. Ironically, he was one of the Senate Democrats who helped Bush win passage of his 2001 cuts.

The Republican-led House is planning a series of votes on extending all of the lower rates this summer, seen as political votes with little chance of becoming law.

"If the House is prepared to take a handful of show votes on taxes this summer, it is a great idea for Senator Baucus to begin laying out some Democratic alternatives," said Jim Manley, a former top aide to Senate Majority Leader Harry Reid.

The chief tax writer for Republicans, Dave Camp, released a blueprint last year for revamping corporate taxes, including cutting the top rate to 25 percent from the current 35 percent.

Nearly every Republican wants to keep individual rates as they are by extending the Bush-initiated cuts for everyone.

Extending all of the lower tax rates will cost several trillion dollars in revenue over a decade, a problematic prospect when budget deficits have topped $1 trillion several years in a row.

The Senate panel led by Baucus has not put forth any proposals of its own, and many people don't expect a lot of details from Baucus before the election.

"I'm expecting something bigger-picture, rather than a lot of details," said Cathy Schultz, a lobbyist for big multinational companies.

A Baucus aide said he will describe a framework for tax reform and how that might fit into deficit reduction.

Democratic and liberal groups want Baucus to push back against business arguments that corporate rates should be slashed without giving up many tax breaks.

"What I hope is that it looks at economic competitiveness but also the importance of the corporate income tax as a revenue source," said Michael Ettlinger, a fiscal expert at the Center for American Progress, a Democratic think tank.

(Reporting By Kim Dixon; Editing by Howard Goller and Eric Walsh)

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