The tax code may be headed for some major renovation, and Senator Ron Wyden, a rangy Oregon Democrat, has come up with one of Congress' most complete blueprints.

Among his recommendations are slashing the corporate income tax rate, repealing a law that lets companies put off paying taxes on overseas income, and allowing a tax holiday for repatriation of foreign profits, he said in an interview.

After 15 years in the Senate and 16 years previously in the House of Representatives, Wyden is under no illusions about the difficulties ahead, but he also offers insight that might defy the many skeptics about tax reform's prospects.

Bill Bradley told me once that tax reform is always totally, completely and thoroughly impossible until 15 minutes before it comes together, Wyden said, referring to the former Democratic senator and professional basketball star who played a key role in the last major U.S. tax reform in 1986.

At some point, people just see how dysfunctional the tax law really is, said Wyden, a Senate Finance Committee member and the No. 2 Democrat on the energy committee.

He acknowledged that the politics of reform are tough and that some lawmakers are already talking about the dual subjects of tax and spending as if they are 2012 campaign issues, but he added an urgent note.

I personally don't believe the country can afford to wait another 14 months until the November 2012 national elections for tax reform, he said. The economic hurt is too great.

Wyden drafted legislation, first introduced in 2010, with now-retired Republican Senator Judd Gregg. Its main co-sponsor is Republican Senator Dan Coats. The Wyden-Coats bill has one other co-sponsor, Democratic Senator Mark Begich.

Its fiscal impact has been fully evaluated by congressional tax experts, unlike some competing tax reform bills.

While Wyden-Coats has still not gained wide support, some of its ideas have. The December 2010 Bowles-Simpson deficit commission's final report, commissioned by the Obama White House, was partly modeled on Wyden's bill.

FEWER BRACKETS

The bill would reduce the number of tax brackets, eliminate the Alternative Minimum Tax, nearly triple the standard tax deduction, and preserve popular deductions for mortgage interest and charitable donations, as well as tax credits for children and earned income.

It would eliminate the law that allows a corporation to defer paying taxes on profits made overseas as long as the money stays abroad. Because of this law, an estimated $1.5 trillion in foreign profits is parked overseas, avoiding U.S. taxes.

Wyden-Coats would grant large corporations a onetime repatriation tax holiday, letting them bring that money into the United States at a rock-bottom tax rate. By eliminating deferral, Wyden said, his bill would sharply reduce the corporate tax rate to 24 percent from 35 percent.

We ought to take away some tax breaks for shipping jobs overseas, like deferral, which specifically allows American business to close in the United States, set up overseas and then pay no taxes to the American government until they bring that money back, Wyden said.

His bill's corporate rate of 24 percent is only one idea, he said. Other bills set different numbers, but the goal should be to dramatically slash the rates.

This would create a dramatic incentive for what I call red-white-and-blue jobs, he said. If you have a competitive rate, you can get rid of some of the other complexities.

For example, corporate lobbyists are promoting territorial taxation, which would allow companies to pay income tax on profits only to the country in which they are earned, no longer to the United States when the profits are repatriated.

I can just tell you that what concerns me about some of those ideas is that under some versions of it, you could still have a lot of gaming, Wyden said.

On the tax and spending proposals presented on Monday by President Barack Obama, Wyden said some of them could be knit together as part of a bipartisan reform effort.

The United States needs ideas to expand the economy and create jobs, he said. That, of course, is what tax reform is all about.

(Editing by Howard Goller and Lisa Von Ahn)

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