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Senate Democrat's budget would reduce tax breaks

By Andy Sullivan

WASHINGTON (Reuters) - The Senate's top budget writer said on Tuesday he was drafting a plan that would raise tax revenue in an effort to control the federal debt, an approach that will probably raise the hackles of Republicans who want to focus exclusively on spending cuts.

With Congress gearing up for a divisive debate over the mounting debt load, Senator Kent Conrad's budget plan could serve as a rallying point for Democrats who say revenue increases as well as spending cuts must be part of any plan to get annual deficits under control.

Conrad said his proposal would actually lower tax rates but increase overall revenue by closing exemptions that riddle the tax code, such as offshore tax havens.

"That doesn't mean a tax increase for anybody here who's paying what they legitimately owe, but it does go after the kind of abuses that have grown very dramatically," Conrad told reporters after describing the plan to Democratic colleagues.

He said the plan would reduce deficits by roughly $4 trillion over 10 years, which would prevent the national debt from rising to a level that might spook investors.

As chairman of the Budget Committee, Conrad oversees writing an annual resolution that broadly sets spending levels before other lawmakers who oversee spending get to work.

The Republican-controlled House of Representatives passed their own budget blueprint last month, which called for sharp cuts to domestic spending and scaling back government-run health programs. It is unlikely to pass the Democratic-controlled Senate.

The United States is expected to run up against its $14.3 trillion debt limit in the coming weeks, and lawmakers from both parties have said they won't vote to raise that level if it is not paired with deficit-reduction measures.

Conrad is a member of a group of senators known as the "Gang of Six" who are trying to come up with a deficit-reduction plan that would be acceptable to both Republicans and Democrats.

He said that effort would not necessarily be derailed if he brought his own blueprint up for a vote in the Budget Committee next week.

"I'm still very active with the Gang of Six and very hopeful that we'll produce a result, but it may not be in time to be part of the budget resolution," he said.

Like the Gang of Six, Conrad said his budget proposal was based on the recommendations of a White House deficit-reduction commission on which he served last year.

That plan called for annual spending caps for the domestic and military programs which Congress funds annually, as well as an overhaul of the tax code that would reduce a popular tax break for home mortgages and reduce a tax break for employer-sponsored healthcare programs.

That plan also called for reforms to Social Security, but Conrad said his plan would not tackle the popular retirement program.

(Editing by Sandra Maler and Vicki Allen)