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Tax-code overhaul backed by Chamber; Business group takes no stand on tax hikes

The U.S. Chamber of Commerce is urging the new congressional deficit-reduction committee to overhaul the tax code, but it took no position on the central issue of whether higher taxes should be part of the proposal.

In a letter to committee members, Bruce Josten, the chamber's chief lobbyist, called for a "complete restructuring of the U.S. tax code" that would lower rates and make the tax code more efficient.

"The chamber urges you to consider how the current tax laws act as an impediment to worldwide competitiveness, a deterrent to saving and investment, and an obstacle to innovation and entrepreneurship," he wrote in the letter sent Tuesday on behalf of the nation's largest business group. The chamber's board includes executives from Pepsico, WellPoint, AT&T and Norfolk Southern.

Josten's letter sidesteps one of the core issues dividing Democrats and Republicans on the 12-member joint committee. Democrats such as Senate Finance Committee Chairman Max Baucus of Montana are calling for a balanced approach that includes tax increases and spending cuts. Republicans such as Rep. Dave Camp of Michigan, who leads the House Ways and Means Committee, are opposed to higher taxes.

Diane Lim Rogers, chief economist at the Concord Coalition, an Arlington, Va.-based group that advocates for deficit reduction, said she was encouraged by the letter, though the group didn't mention a specific revenue target.

Rogers said the letter places a tax overhaul next to entitlement spending as part of the work for the joint committee. That's the same formula used by bipartisan groups that have called for tax increases as an element of deficit reduction.

"What they're saying very carefully is that there are ways to raise revenue that are not harmful to the economy," said Rogers, a former Democratic staff member on the Ways and Means Committee.

When asked questions about the chamber's stance, including whether the group would support an agreement that would pair $10 in spending cuts with every $1 in tax increases, spokeswoman Blair Latoff referred to the letter and said it speaks for itself. All the Republican presidential candidates who participated in a debate in Iowa last week said they would reject such a deal.

The joint committee, headed by Democratic Sen. Patty Murray of Washington and Republican Rep. Jeb Hensarling of Texas, was given the task under the recently approved debt-ceiling law of recommending $1.5 trillion in deficit reduction by Nov. 23. The House and Senate must vote on the recommendations by Dec. 23.

If the committee doesn't reach an agreement or its recommendations don't become law, automatic spending cuts would occur, starting in 2013.

The letter doesn't say the Chamber of Commerce would oppose a tax overhaul that raised more revenue than the current tax system does. Josten did say that tax changes shouldn't single out industries.

Democrats, sensing the difficulty of rewriting the tax code in three months and trying to persuade Republicans to back higher revenue, have been discussing the same targeted tax increases that President Obama has supported in the past, raising taxes for oil and gas companies, private equity managers and corporate-jet owners.

In a memo Wednesday to House Republicans, Majority Leader Eric Cantor of Virginia warned of the damaging effects of higher taxes.

"It is in everyone's interest -- especially small-business job creators -- for the deficit-reduction committee to report and for Congress to enact at least the $1.5 trillion in spending reductions called for without a tax increase," he wrote.

Unlike his statements on taxes, Josten was clearer in his prescription for how the committee should address spending on government health care and retirement programs.

"Entitlement spending is out of control, on autopilot and leading America toward fiscal disaster," he wrote. "Moreover, Congress cannot fix the root cause of the problem without addressing the entitlement programs of Medicare, Medicaid and Social Security."

The chamber's lack of emphasis on revenue neutrality in a tax overhaul leaves open the possibility that the group could ultimately support higher taxes as part of a broader proposal, said Michael Linden, director of tax and budget policy at the Center for American Progress, which often agrees with Democrats.

"They're laying down a marker on what tax reform should look like, very broadly, but they haven't said that revenue has to stay at the same level it is now," he said.

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