Senator Max Baucus, Montana Maverick, to Retire
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Senator Max Baucus, Montana Maverick, to Retire

REUTERS/Jonathan Ernst

Max Baucus, the Democratic chairman of the Senate Finance Committee, said on Tuesday he will not seek re-election next year, improving Republican chances of capturing his seat and giving him a freer hand in his bid to revamp the tax code.

First elected to the Senate in 1978, Baucus, 71, will become the eighth senator - six Democrats and two Republicans - to announce plans to retire at the end of next year. Baucus in a statement pledged to serve out his term and focus on fixing the tax code and other economic challenges. "I'm not turning out to pasture because there is important work left to do, and I intend to spend the year-and-a-half getting it done," he said.

Democrats now hold the Senate, 55-45. Baucus, of Montana, won a sixth term with 73 percent of the vote in 2008. He had been favored to win a seventh term, but still could have faced a competitive race, according to analysts.

Jennifer Duffy, who tracks Senate races for the nonpartisan Cook Political Report, said she was changing her rating of the 2014 Senate race in Montana from "Lean Democrat" to "toss up."

As Senate Finance chairman, Baucus played a key role in President Barack Obama's overhaul of the U.S. healthcare system, signed into law in 2010 and known widely as Obamacare. Baucus is now working with his House of Representatives counterpart, Republican Dave Camp, on rewriting the complicated tax code, a project that faces major obstacles from Republicans. By retiring, Baucus could free himself from the political pressures of running for re-election, but that would not reduce by much the challenges of a tax-code overhaul.

"It may suggest that he is going to devote 100 percent of his energy to tax reform, so that may be a boost for getting it done, because both he and Camp are on the same schedule now," said Ken Kies, a veteran tax lobbyist. Camp will lose the gavel of the tax-writing House Ways and Means Committee in 2014 under House rules.

Regardless, Kies said, major challenges remain, beginning with Republican opposition to calls by Democrats to raise new tax revenue by curbing tax breaks for the wealthy. Investor analyst Jim Lucier of Capital Alpha Partners said that despite Baucus being a legislative leader, "his leverage will surely decrease as the end of his term approaches."

If Democrats retain the Senate in next year's election, Democratic Senator Ron Wyden of Oregon would be next in line in party seniority to replace Baucus as Finance Committee chair. The Finance Committee oversees tax, trade and healthcare, but the power of committees overall has waned in recent years as congressional leadership has dominated major decisions, eroding the power and influence of committee chairmen.

The tax code has not been substantially changed since 1986, when President Ronald Reagan struck a deal with a divided Congress to lower rates and reduce exemptions and special breaks.

Obama says he backs a major rewrite, but the disagreements over the details - which might include clipping popular tax breaks - make the project politically difficult. Camp is expected to introduce legislation this year, though the timeline of that has been postponed before.

Baucus is a moderate in a rural state that went for Republican Mitt Romney over Obama in last year's White House race, 55 percent to 42 percent. Former Montana Democratic Governor Brian Schweitzer is seen as a top contender to run for Baucus' seat, while Representative Steve Daines is among possible Republican candidates.

As a moderate, Baucus often butts heads with more liberal members of Congress, including those in Democratic leadership. He broke with his party to vote for tax cuts engineered by President George W. Bush in 2001, and to add a prescription benefit to the Medicare health plan for the elderly.

Baucus, who is an avid runner and begins nearly every speech with a quote from a famous person, also recently opposed the Senate's budget resolution that sought to raise taxes earlier this year and voted against Obama's effort to curb gun violence with new controls on firearms.

A liberal Democratic group praised his decision. "Good bye, Senator K Street," said Stephanie Taylor, co-founder of the Progressive Change Campaign Committee. "Montana will finally have a chance to have a senator with its best interests at heart, and we hope Brian Schweitzer jumps into the race immediately."

Baucus also struggled to defend the healthcare law he was instrumental in shepherding through the Senate. The law is unpopular in Montana, and Baucus recently worried at a hearing that poor implementation would cause a "train wreck."

The seven senators who earlier announced they would not run for re-election are Democrats Carl Levin of Michigan, Frank Lautenberg of New Jersey, Tom Harkin of Iowa, Tim Johnson of South Dakota and Jay Rockefeller of West Virginia, along with Republicans Saxby Chambliss of Georgia and Mike Johanns of Nebraska.

Additional reporting by Jonathan Weber of Reuters.