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Some lawmakers bristle at tax overhaul starting with 'blank slate'

U.S. Senate Minority Leader Mitch McConnell (R-KY) walks to lunch after a procedural vote to move forward on immigration reform legislation
U.S. Senate Minority Leader Mitch McConnell (R-KY) walks to lunch after a procedural vote to move forward on immigration reform legislation

By Kim Dixon

WASHINGTON (Reuters) - The U.S. Senate's Republican leader and one of its most liberal members seldom agree on much, but on Tuesday both threw cold water on efforts by senior tax legislators to overhaul the U.S. tax code by starting with a "blank slate."

Mitch McConnell, the top Senate Republican, and Bernie Sanders, and independent, were both reacting to a framework for tax reform offered last month that would wipe out all tax breaks and force lawmakers to make the case for putting them back in.

Some members of Congress responded that the plan would not work because it fails to address a key dispute - whether a tax code overhaul should raise new tax revenue.

"I don't see how we get anywhere, candidly, even though we all know it needs to be done to make our country more competitive," Kentucky's McConnell told reporters on Tuesday.

Sanders, of Vermont, said that with corporate taxes making up an increasingly small part of federal revenue, raising new revenue is essential.

"Do you believe that at a time when corporate taxes are extremely low, that we need to bring in more revenue to the federal government?" said Sanders, who typically votes with Democrats. "Certainly the Republicans do not, and I get nervous about where Senator Baucus is coming from."

Democratic Senator Max Baucus, chairman of the chamber's Finance Committee, and the panel's top Republican, Senator Orrin Hatch, late last month declared all tax breaks "off the table" and asked colleagues to submit justifications for keeping them in an effort to jump-start a top-to-bottom tax code overhaul.

Baucus, a Montana Democrat who will not run for re-election in 2014, briefed Democrats on Tuesday over lunch.

Harry Reid, the top Democrat in the Senate, said Baucus was "well received," but there is a "long way" to go to legislation. Reid said Baucus told Democrats he supports raising new revenue.

Democrats generally back raising more revenue through an overhaul, while Republicans want to trim tax breaks so that tax rates can be cut. For the most part, both parties back reducing individual and corporate taxes and simplifying the tax code.

Baucus and his counterpart in the House of Representatives, Ways and Means Committee Chairman Dave Camp, have for years worked to lower rates and scrub the code of wasteful, special-interest tax breaks.

Baucus and Hatch gave lawmakers until July 26 to argue for retaining tax breaks, including big ones such as the home mortgage interest deduction and charitable giving write off.

"It is not a good approach," Democratic Senator Jay Rockefeller told Reuters. "It puts more control in the hands of Baucus and Hatch .... If you take everything off the table then you have to put everything back in ... that is very hard to do."

Baucus and Camp began a nationwide road trip this week to sell the tax overhaul effort. Baucus said getting out of Washington reaffirms his belief the public wants tax reform.

(Additional reporting by Richard Cowan; Editing by Kevin Drawbaugh and Philip Barbara)

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