Sunday, November 25, 2012
New York Times: Politics Complicates the Math in Ending Tax Breaks for Rich, by Annie Lowrey:
Whether to raise revenue through increasing tax rates or cutting loopholes has become a central sticking point in the negotiations on a major debt deal.
The White House has drawn one line in the sand: it argues that tax rates must go up on income above $250,000 a year, because reducing tax breaks for the affluent cannot on its own raise the $1.6 trillion in additional revenue it seeks. Congressional Republicans have drawn another line: they might accept higher revenue, but only through the reduction of tax breaks.
But is it even possible to raise $1.6 trillion from wealthy households without changing tax rates? Experts say it is. But doing so might be politically infeasible and hugely unpopular, because it would involve wiping out nearly every deduction, credit and preferential rate those affluent households claim. ... There would be no deduction for charitable giving, or close to none, angering wealthy donors and nonprofit directors. The home mortgage interest deduction would vanish, hurting the housing market just as it has started to turn around. Preferential tax treatment of capital gains and dividends would disappear, probably throwing the markets into a sell-off. The top 1 percent of earners might see their after-tax income fall as much as 19.8%, according to calculations by the Tax Policy Center.
(Hat Tip: Mike Talbert.)