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Lawmakers go online for grassroots push on tax reform

U.S. 1040 Individual Income Tax forms are seen in New York March 18, 2013. REUTERS/Shannon Stapleton
U.S. 1040 Individual Income Tax forms are seen in New York March 18, 2013. REUTERS/Shannon Stapleton

By Kim Dixon

WASHINGTON (Reuters) - The political goal is the same as it was in the mid-1980s: grassroots support for an overhaul of the U.S. tax code. But lawmakers' approach this time is thoroughly modern.

The chairmen of Congress's tax-writing committees on Thursday launched a website they hope will boost public support for overhauling the tax code in the same way that a "Write Rosty" letter-writing campaign did a quarter-century ago.

TaxReform.gov, created by U.S. Senator Max Baucus, a Democrat, and Representative Dave Camp, a Republican, asks Americans to share their stories and ideas about tax reform.

The site's home page heading says, "Comprehensive Tax Reform: building a tax code for the 21st century."

The U.S. tax code has not been revamped since 1986. The last successful effort was led by Republican President Ronald Reagan and Democratic Representative Dan Rostenkowski, who held the position Camp holds today.

As chairman of the tax-writing House of Representatives Ways and Means Committee, Rostenkowski asked the public to "Write Rosty" if they backed his effort to reform the tax code along with Reagan. More than 75,000 letters to Rostenkowski poured in.

Camp has vowed to move a tax reform bill out of Ways and Means this year. Baucus, chairman of the Senate Finance Committee, has said he wants to spend much of the remaining time before his 2014 retirement working on tax reform.

Polls show the public wants a simpler tax code, but major obstacles confront Baucus and Camp.

One is the political divide over whether tax reform should increase tax revenue. Another is the difficulty of eliminating scores of tax breaks prized by individuals and corporations alike.

U.S. President Barack Obama backs a tax code rewrite and he has listed detailed proposals in repeated budget plans, but he has not pursued that objective as aggressively as Reagan did.

There are other significant differences from that period.

Clint Stretch, a former congressional tax staffer, said, "Reagan talked about tax reform constantly and it was well received in stump speeches."

In 1986, the tax code was less complex and the tax loopholes being exploited were more glaring. Reform advocates also won the backing of a big share of the business community.

BUSINESS BUY-IN

Today's business community is divided, and the code is loaded with hundreds of special exemptions, deductions and other favors to special interests. Also, the lobbying industry that protects each of these is larger and more entrenched.

"The public, just like in 1985, is naturally skeptical of tax reform," Camp and Baucus said in a joint statement.

"The kind of engagement the 'Write Rosty' campaign sparked nearly 30 years ago is even easier today thanks to the Internet and social media. That's why the chairmen are launching TaxReform.gov" and a @simplertaxes Twitter handle," they said.

Also on Thursday, the Senate Finance Committee met to weigh options on boosting U.S. companies' global competitiveness, the latest in a series of meetings on tax issues.

Businesses often complain that the top U.S. corporate income tax rate is 35 percent, which is high by global standards, though many companies pay well below that rate due to their ability to use tax breaks and shift profits offshore.

A 12-page paper by bipartisan finance committee staff was discussed at the meeting. It included options to move toward a so-called territorial system - where companies' foreign income is largely exempt from U.S. income tax. That policy is backed by much of corporate America and most Republicans.

It also included options that move in the other direction, including repealing deferral of taxation on foreign profits and the immediate taxation of all income from company subsidiaries in low-tax countries - ideas backed by some Democrats.

The paper does not lay out a one-time tax holiday known as "repatriation" that would put a lower tax rate on profits if they were brought into the United States.

The paper cited estimates of taxable income shifted by U.S. companies from higher-tax countries to tax havens at between $58 billion to $111 billion annually.

Large U.S. companies boosted their offshore earnings by 15 percent last year to a record $1.9 trillion, avoiding hefty tax bills by keeping the profits abroad, according to a report released this week by research firm Audit Analytics.

(Reporting by Kim Dixon; Editing by Kevin Drawbaugh,Vicki Allen, Doina Chiacu)

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