* 'Fiscal cliff,' tax reform go hand in hand-Baucus
* Democrat short on detail, hopes for bipartisan deal
By Kevin Drawbaugh and Kim Dixon
June 11 The United States is on a "dangerous
path" that could lead to a European-style fiscal crisis, warned
the Senate's top tax legislator on Monday, while calling for
more tax revenue and ending corporate incentives to shift
profits and jobs overseas.
Democrat Max Baucus urged fellow lawmakers to resolve by the
end of 2012 a host of "crucial spending and tax decisions" that
will arise immediately following the Nov. 6 presidential and
The remarks by the chairman of the Senate Finance Committee
were short on specifics and did not lay out a clear working
agenda, but they reflected growing urgency on Capitol Hill.
"Much of the talk in Washington these days is focused on the
so-called fiscal cliff," Baucus said in a speech to the
Bipartisan Policy Center, a think tank.
"We need to address those crucial spending and tax decisions
by the end of this year ... Deficit reduction must include both
spending and revenues."
After the elections, a wave of fiscal issues will hit
Congress, including the expiration of temporary tax cuts made
under Presidents George W. Bush and Barack Obama, huge budget
cuts ordered last year, and what to do about various tax breaks.
Decisions on these and other questions will come at a time
when the United States, struggling to grow out of a financial
crisis and recession, has run federal budget deficits topping $1
trillion for three straight years and is on track for a fourth.
At the same time, protracted fiscal crises in Europe are
casting a shadow over the sluggish U.S. economic recovery.
Action on a deficit-reduction plan and tax code overhaul has
been put off over the past two years as Democrats and
Republicans have been unable to overcome deep divisions, with
Democrats seeking tax increases on the wealthy and Republicans
focusing on domestic spending cuts without any tax increases.
"We're on a dangerous path. If we don't act, it could lead
towards fiscal crisis like some European countries," Baucus
Echoing other Democrats' views, he said any tax code rewrite
must raise revenue, a position that is an odds with the current
Republican negotiating stance. "Mathematically there is no
escape," Baucus said, without laying out any details.
Obama, a Democrat, and lawmakers from both parties say they
favor cleaning up the tax code in a broad overhaul, which most
define as cutting marginal tax rates while trimming tax breaks
that favor individual groups and industries.
House Republicans are backing a type of "fast-track"
procedure that would impose tax reforms if Congress failed to
act before a set deadline, though they are still working out the
details. Baucus said that option should be on the table.
"Any tax reform plan must be developed with a sound budget
in mind that reduces deficits and debt. But the deficit is not
our only hurdle - not by a long shot. Since the last major tax
reform in 1986, the world has changed drastically. Our tax code
hasn't kept up, and now it's acting as a brake on our economy."
Baucus, a moderate Democrat from Montana, has been holding
hearings for more than a year on the topic but has not spoken
extensively on it. He is up for re-election in 2014.
Several experts said they were encouraged that Baucus did
not lay out clear markers, suggesting he is keen to forge a
bipartisan deal. "People shouldn't sit around making lists of
what they would not do," said Bill Thomas, former chairman of
the U.S. House of Representatives tax writing panel.
A revamp of the code would also include big changes to
Baucus said that under the current system, protections to
prevent companies from shifting income to tax havens to avoid
taxes have worsened, and he said more needs to be done to keep
jobs in the United States.
"The U.S. loses billions in revenue every year to tax
havens," Baucus said.