Tags: orrin | hatch | tax | code

Sen. Hatch: Tax Revamp Will Take Years

Monday, 28 Feb 2011 03:55 PM


WASHINGTON (Reuters) - A revamp of the U.S. tax code will take several years as the parties resolve fundamental disputes over how taxes influence behavior among businesses and individuals, the top Senate Republican tax-writer said Monday.

Orrin Hatch, the top Republican on the Senate Finance Committee, spelled out key differences between his party and Democrats including President Barack Obama as they begin talks on overhauling the complicated U.S. tax code.

"It's going to take a few years to do it if we can do it at all," Hatch told a group of conservatives in Washington on the eve of the first Senate Finance Committee hearing on the topic this year.

Hatch criticized Democrats who he said see the tax code as a tool to promote redistribution of wealth and said looking at the distribution of tax burdens was paramount.

Obama and lawmakers are debating a rewrite of the nation's tax laws and have begun by focusing on trying to reduce the 35 percent top corporate tax rate, among the world's highest.

Because of special deductions and tax breaks, many companies pay much lower rates, but these vary sharply by sector and corporation.

While there is consensus that the corporate statutory rate is too high relative to other countries, Democrats and Republicans are far apart on how to go about it lowering it.

Hatch, who also said it would be difficult to tackle corporate and individual tax reform separately, accused Democrats of trying to use the mantle of tax reform to raise revenue.

"We must reduce deficits and debt through spending reductions. Separate, we must promote tax reform," said Hatch, who is up for re-election in 2012.

Republicans and Democrats in Congress are now in a stand-off over spending cuts that threatens to shut down the federal government, though the immediate likelihood of that has eased in recent days.

Obama and his tax deputies have said a corporate tax code overhaul will not aim to raise revenue, but they also say it should not add to bloated U.S. budget deficits, expected to top $1.65 trillion this year.

Hatch has been courting the conservative offshoot tea party movement as he nears re-election. Former Republican Sen. Bob Bennett of Utah lost his seat last year to more conservative opponents who criticized his efforts to work with Democrats.

A spokesman for the top Democrat on the Senate finance committee, Max Baucus, was not available for comment.

The president's deficit reform commission and others have laid out ways to lower the corporate tax rate, including trimming so-called tax expenditures — tax breaks enjoyed by companies, such as quicker investment write-offs and depreciation rules.

By paring deductions and credits, it is theoretically possible to lower the corporate rate without losing revenue.

Hatch said some of those special tax breaks will have to go, but he would not be specific.

"We're going to have to get into the whole area of tax expenditures and see which ones deserve to continue and which ones don't," he said.

But he said many tax breaks are important to stimulate business, including those to promote energy and natural resource development.

"We find that when you give special tax breaks there is more incentive to expand business and employ more people," he said.

Obama has criticized the energy industry and sought to trim about $46 billion in oil, gas, and coal industry tax breaks in his budget proposal.


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