Wednesday, December 5, 2012
New York Times: Tax Deduction Limits May Trim Deficits, but Not Easily:
Behind President Obama’s insistence that tax rates must rise on higher incomes is a belief that Republicans cannot raise as much revenue as they claim, $800 billion in the first decade, simply by limiting deductions and loopholes. Yet in the past, Mr. Obama supported that option to collect even more.
Republican Congressional leaders, for their part, say it would be simple to design a plan limiting tax breaks for the affluent as part of a bipartisan budget deal. Yet they are not proposing how to do so because, well, it is not so simple. And it would certainly be controversial.
On Tuesday, a day after Speaker John A. Boehner made his deficit-cutting counteroffer to Mr. Obama that included a proposal for $800 billion in revenues, his office provided no details about how to raise that money. Instead, Republican aides cited a nine-page paper last month from the Committee for a Responsible Federal Budget, a centrist business-supported group dedicated to lower deficits, with three options for limiting deductions as an alternative to letting the top tax rates increase.
According to the analysis, each option could allow the government to collect about as much new revenue as it would if the top Bush-era tax rates of 33% and 35% expire as scheduled on Dec. 31 and revert to the Clinton-era levels of 36% and 39.6%, respectively, for couples with income above $250,000 and singles above $200,000....
Nonpartisan analysts say Republicans are correct that it is possible to raise $800 billion or more from limiting deductions for the affluent. But, they add, any such proposal would face big political hurdles given the popularity of the tax breaks at issue — especially for charitable donations, mortgage interest, state and local taxes and employer-provided health insurance. And if Congress did pass such a plan, it could further complicate tax filing for many people. ... Doug Holtz-Eakin, the president of the American Action Forum, a center-right research organization that many Republicans consult, said: “It can be done. The next question is, would you like what you have when you finish?”
(Hat Tip: Mike Talbert.)