Monday, November 12, 2012
Washington Post editorial: Limiting Tax Deductions:
As the fiscal cliff looms, leaders in Washington draw red lines. President Obama is “asking the wealthiest to pay a little more in taxes,” as he repeated Friday. House Speaker John A. Boehner is “open” to more revenue but only in exchange for significant spending cuts — and raising existing tax rates is “unacceptable,” the Ohio Republican insisted.
So, more gridlock? Not necessarily. There are politically feasible ways to get more revenue, mostly from the wealthy — without raising tax rates. One is to limit the value of itemized deductions, 80% of which accrued to the top 20% of taxpayers in 2011, according to the Tax Policy Center. More than 25% of the benefits flowed to the top 1%. ...
Raising revenue through a high deductions cap also might minimize political resistance, since it leaves most tax breaks in place for most people. There would be pushback from charities that depend on donations from the wealthy, and from high-tax states that rely on state and local tax deductions. But assuming legitimate issues can be addressed, capping deductions could be part of a red-blue compromise.