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U.S. Senate’s Hatch sees support for tax reform

WASHINGTON (Reuters) – The U.S. Senate’s top tax law writer sounded determined on Friday about pursuing comprehensive tax reform, though this is viewed as unlikely by most analysts.

“Though there are disagreements on the details, there is bipartisan support for tax reform in Congress,” said Orrin Hatch, Republican chairman of the Senate Finance Committee, at a conference for tax lawyers, analysts and economists.

“Members of both parties have expressed their support for a tax overhaul. And, I believe there is real momentum to get something done on tax reform this year, if we remain committed. And, believe me, I’m committed,” he said.

Hatch took over leadership of the committee this month when Republicans gained control of the Senate. He has divided the panel into five working groups. He said he expects to get recommendations from the groups “later this spring.”

The groups are looking at the individual income tax, business income tax, savings and investment, international tax and community development and infrastructure.

The U.S. tax code has not been overhauled thoroughly in 28 years. In that time it has become riddled with loopholes. As a result, tax avoidance is a growing problem.

The loopholes, together with deep tax cuts some years ago, means the government does not raise enough revenue to pay its bills.

At the same time, tax experts also generally agree that the system is so complex and often contradictory that compliance costs are excessive and economic productivity is harmed.

The main obstacle to fixing the code is that special interest groups immediately leap to the defense of their particular loopholes whenever lawmakers start talking reform.

Finding a way to overcome the gridlock that results is a task that has defied Congress and the White House since 1986.

Hatch has laid out basic principles for reform. At the conference, he said he has the impression that Democratic President Barack Obama might be willing to do a deal on business tax reform alone, setting aside individual income tax issues.

“We need to lower corporate tax rates and transition toward a territorial tax system,” Hatch said. A territorial system is one that would exempt all or most of the foreign profits of U.S. corporations from the corporate income tax.

"The Senate Finance Committee is already fully engaged in a very real tax reform effort ... My goal is to introduce such a bill and mark 
it up in the committee later this year," he said.
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