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Tax reform vital to deficit panel's work: Senator Wyden

By Kevin Drawbaugh

WASHINGTON (Reuters) - As lawmakers on the congressional "super committee" grapple with the deficit, they keep talking about an objective that they and the experts swear cannot possibly be achieved soon -- tax reform.

"I've been encouraged at how many times members of the committee have brought up tax reform," said Democratic Senator Ron Wyden, co-author of a bipartisan tax reform bill that offers a model of how an overhaul might happen.

"It seems that this topic that didn't have a lot of legs before ... keeps coming up again and again," he told Reuters.

"There is a recognition that you cannot deal with this by cutting spending alone. You've got to grow and tax reform has a proven record" of encouraging that, he said.

The Joint Select Committee on Deficit Reduction, as the super committee is formally known, met again on Tuesday.

Despite Wyden's optimism, the signals before and after the session on the chances of rewriting the tax code for the first time since 1986 were not encouraging.

The super committee must identify by November 23 at least $1.2 trillion in new government budget savings over 10 years.

House Majority Leader Eric Cantor said on Tuesday that tax reform may have to wait until after November 2012's elections.

Senate Finance Committee Chairman Max Baucus, a Democrat and super committee member, said after Tuesday's hearing that tax reform "is just so complicated and so important; I don't think we have yet determined whether we can do" it this year.

Wyden was not deterred.

"We have a bipartisan bill. It's the only one in 25 years in the tax reform area," he said, referring to legislation he is co-sponsoring with Republican Senator Dan Coats.

Wyden-Coats has been scored -- or fully evaluated on its fiscal impact -- by Congress's Joint Committee on Taxation and it offers both parties a winning political narrative, he said.

One of the bill's keys is eliminating a tax code provision that allows corporations to defer payment of tax on their overseas profits. It also offers a one-time tax holiday to let companies repatriate at a low tax rate an estimated $1.5 trillion in foreign profits now held abroad avoiding taxes.

The additional revenue achieved from ending overseas income deferral helps to fund a sharp reduction in the corporate tax rate to 24 percent from 35 percent, under Wyden-Coats.

"There's an opportunity here to create jobs for small businesses in the United States, for large businesses in the United States, and have a competitive rate for multinationals," Wyden said. "Competitive rates solve a lot of problems."

He sees the package presenting a winning political proposition for both sides.

"A Democrat can stand up in a labor union hall and say we're making it attractive for companies to do business in the United States again. We're bringing jobs home. And a conservative Republican can say this is an important effort to lower rates," he said.

(Editing by Gary Crosse)

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