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U.S. lawmakers take Washington tax reform show on the road

Sen. Max Baucus, (D-MT) is questioned by media at the U.S. Capitol in Washington December 31, 2012. REUTERS/Mary F. Calvert
Sen. Max Baucus, (D-MT) is questioned by media at the U.S. Capitol in Washington December 31, 2012. REUTERS/Mary F. Calvert

By Kim Dixon

PHILADELPHIA (Reuters) - Abandoning the corridors of power for a shop full of gleaming, supersized steel refrigerators and steam ovens, two U.S. lawmakers took their quixotic bid to overhaul the 70,000-page tax code on the road this week to rally public support outside Washington.

Democratic Senator Max Baucus and Republican Representative Dave Camp, who chair the congressional tax-writing committees, sought ideas on Monday from the owner of Mrs. G's, a 40- employee New Jersey appliance business.

There in Lawrenceville, and later at the Hub, a Philadelphia-based technology meeting space with about 50 workers, they spoke of arcane tax subjects from depreciation rules to accounting methods and how to make the tax code better.

"What are the most maddening, complex provisions that make you want to pull your hair out?" Baucus asked Debbie Schaeffer, 54, the president of Mrs. G's who led the two through a tour of appliances in the business she took over from her grandmother.

"We don't have enough time," Schaeffer's certified public account, Marguerite Mount, chimed in. She then noted the problems of defining small business reflected in section 263(a) of the tax code. "Defining small business and clarity on that would be huge."

The lawmakers' effort will shift into high gear after the congressional August break, when both Camp and Baucus are set to release long-awaited proposals to revamp everything from charitable contributions to business write-offs.

Camp and Baucus began a nationwide tour earlier this month to drum up support for the effort, which faces skepticism from party leaders and a fight from lobbyists aiming to protect the most lucrative and popular tax breaks.

REBUFFED

Some fellow senators last week were critical of an effort by Baucus and Republican Senator Orrin Hatch to solicit specific ideas for rewriting a tax code that was last revamped 27 years ago.

"It's messy," Baucus said, acknowledging that it would not be easy to forge an agreement.

Both businesses the duo visited file tax reforms as pass-through entities - meaning the profits flow directly to the owners who are then taxed. Such business pay the same rate as the highest income taxpayers of 39.6 percent.

Neither of the owners complained about the rate, though they did grumble about benefits traditional corporations get, such as the ability to carry forward losses to reduce tax bills.

The interactions highlighted the challenges facing the effort, including getting taxpayers to identify tax provisions they now enjoy that they would be willing to give up for lower tax rates - the goal of the effort.

By way of example, Schaeffer could not name what deductions she would be willing to give up for a lower rate.

At the Hub, a business that rents out space to other businesses for holding corporate meetings, co-founder John New said he appreciated many aspects of the tax code, but the mind- numbing complexity eats away at time that could be better spent building his business, he said.

"Some of the things are built on a rational set of principles," New said. "But when it goes past page 2 or 3 (of instructions) it really goes into la-la land."

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. Breaks range from mortgage interest deductions for homeowners to exceptions and special provisions for business.

(Reporting by Kim Dixon; Editing by Howard Goller and Paul Simao)

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