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Senators balk at senior U.S. lawmakers' tax reform drive

Senator Max Baucus (D-MT) (L), the chairman of the Senate Finance Committee, and Senator Orrin Hatch (R-UT), the co-chair, confer during tes
Senator Max Baucus (D-MT) (L), the chairman of the Senate Finance Committee, and Senator Orrin Hatch (R-UT), the co-chair, confer during tes

By Kim Dixon

WASHINGTON (Reuters) - Despite talk about tax reform, U.S. senators are largely shrugging off a request that they present specific ideas for rewriting a tax code that has grown to more than 70,000 pages since it was last revamped 27 years ago.

With a deadline for submissions approaching on Friday, members of Congress and their aides say many Senators are declining to accept the challenge from Democratic Senator Max Baucus and Republican Senator Orrin Hatch.

Baucus, chairman of the tax-writing Senate Finance Committee, and Hatch, the top Republican on the panel, want senators to make a case for exceptions they believe should remain if the tax code was theoretically wiped clean.

"Give us your submissions. What do you want added back from a clean slate?" Baucus pleaded on the Senate floor on Tuesday.

The tax code was last thoroughly revamped in 1986, when Republican President Ronald Reagan struck a deal to pass legislation backed by a Democratic House of Representatives and a Republican Senate.

In the years since, tax issues have dominated public and congressional debate and factored prominently in U.S. election campaigns, even as tax breaks expanded.

"Since that date, it's built up barnacles, loopholes, deductions, credits, 15,000 changes," Baucus said.

These additions cost the government $1.3 trillion a year, according to the congressional Joint Committee on Taxation. Optimists say an overhaul is coming if not this or next year, then within several years.

But lawmakers are reluctant to propose removing specific tax breaks popular with special interests that apply pressure through congressional lobbyists. These range from mortgage interest deductions for homeowners to breaks for business.

The finance committee will draft legislation for debate when Congress returns from its August recess, Baucus said.

"I'm guessing ... September, October, November," Baucus said of when his committee would debate a formal proposal.

Asked by reporters later if he has received many submissions, Baucus said "a good number," but he has not read them all so could not say how detailed they were.

ISSUES AVOIDED

The two senators have purposely avoided the most partisan issue - whether to raise revenue - but that has not prevented their colleagues from resorting to general arguments about tax revenue while avoiding making specific proposals.

"It has to have revenue as part of the agreement," said Democratic Senator Robert Menendez. "On the Democrat side, the overwhelming view is there needs to be revenue."

Republicans especially are not eager to take part without a vow to keep taxes from going up, congressional aides said.

"In theory, a blank slate makes sense, but you have to resolve the political challenge - what to do about revenue," a Republican tax aide to a senator on the finance committee said.

Republican Senator John Hoeven said he was likely to simply express "broad principles."

"The key is that it is pro-growth, that it stimulates job creation and of course, that it doesn't raise taxes," he said.

In the U.S. House of Representatives, Republican Dave Camp also was working on legislation to overhaul the tax code and was touring the country with Baucus to make the case.

LOBBYISTS SCRATCH HEADS

Meanwhile, business and other interest groups are trying to rally support for a tax revamp that cuts their tax rates.

The Business Roundtable, a lobbying group made up of companies such as Boeing Co and Honeywell International Inc, encouraged senators in a letter on Tuesday to take part in the process, but said it should not raise taxes on corporations.

Even lobbyists for popular breaks are having a hard time convincing senators to go on the record to back their preferences.

One of the most popular but pricey tax expenditures is the home mortgage interest deduction, which costs the government $100 billion a year, according to the Congressional Research Service.

A lobbyist for the National Association of Realtors said it was unclear who would back the policy.

"We are trying to be on as many senators' request lists as possible," said Jamie Gregory, a lobbyist with the group.

Lawmakers who have been specific in the past, including liberal Democrat Carl Levin and conservative Republican Pat Toomey, are not revealing as many details as requested.

Levin, who proposes legislation every year to rid the code of tax breaks that help big companies shield profit from taxes on overseas income, is likely to submit a general letter expressing support for tax reform that is fair and raises revenue, an aide said.

Toomey, who in 2011 offered a tax revamp plan during bipartisan talks over the deficit, will not be taking part, according to one of his aides.

(Reporting by Kim Dixon; Editing by Howard Goller, Grant McCool and Andre Grenon)

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