Montana panel offers Baucus tax reform ideas

HELENA (AP) — A panel advising U.S. Sen. Max Baucus on his plan to rewrite the nation's tax code told him on Thursday that the government should maintain deductions that benefit the poor, small businesses, education, retirement savings and innovation.

Baucus is working with the chairman of the House, Ways and Means committee, Republican Dave Camp of Michigan, on a plan to get rid of many tax credits, deductions and loopholes viewed as unproductive. They also want to reduce tax rates.

Baucus said he hopes the effort will result in the first major change to the tax code since 1986. He believes the code is disproportionately difficult on small businesses.

The Democrat, retiring at the end of 2014, said one issue remains the way large corporations have been able to identify overseas tax havens and essentially pay no taxes. He said the overall complexity is also hurting the nation's competitiveness.

"In what way should it be simplified? I hear generally it is way too complicated," Baucus said.

The advisory council of business, farming and labor leaders said tax benefits for low-income workers and children are important to keep. They highlighted the earned income tax credit and child care tax credit as incentives that have helped the working poor stay out of poverty.

"We're of the belief that as you tear this down and build it back up you need to put these two provisions back in for families," said Al Ekblad, with the Montana State AFL-CIO. "These are important and we would encourage you to keep."

Baucus said there is a lot of interest back in Washington, D.C., in keeping both.

The panel also told Baucus that other important tax deductions include: expenses for small businesses, education, retirement savings, and innovation incentives. The panel told Baucus it will be important to balance a simpler tax code with keeping it fair.

Spencer Williams, owner of Bozeman manufacturer, West Paw Design said many businesses like his take advantage of tax benefits simply because they are there — not because they are necessarily good for business. He said it needs to be simpler.

"Get it out of the way. Let businesses make good decisions for businesses," Williams said. "Many incentives are just used because they are there, not because they are important to the business."

The panel said other issues, like incentives for research and development, at least need to be improved and simplified. Bert Robins, with Butte casting foundry SeaCast, said the current credit is so complex it takes a specialist to figure out and isn't really often worth it after tax preparers are paid.

"It takes time and time is money. It takes focus off other things you could be doing," Robins said.

The panel said that incentives for retirement savings are important, and perhaps even need to be expanded to encourage more to save for retirement.

Baucus has said he hopes to have a proposal to bring to committee later this year.