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Thursday, May 16, 2013

Senate Releases Tax Reform Option Paper on Economic and Community Development

Senate LogoThe Senate Finance Committee yesterday released its Sixth Tax Reform Option Paper on Economic and Community Development:

This document is the sixth in a series of papers compiling tax reform options that Finance Committee members may wish to consider as they work towards reforming our nation’s tax system. This compilation is a joint product of the majority and minority staffs of the Finance Committee with input from Committee members’ staffs.

The paper lists the following broad goals in this policy area:

  • Simplify the law in order to reduce the cost to businesses and individuals of complying with the tax code;
  • Carefully consider whether and how to address any positive or negative externalities;
  • If policy makers choose to include incentives in a reformed tax code, make such tax expenditures more equitable and efficient; and
  • Carefully consider how to treat different parts of the country and industries equitably.

On housing, the paper includes the following options:

  • Gradually repeal the mortgage interest deduction;
  • Limit the mortgage interest deduction;
  • Convert the mortgage interest deduction to an above-the-line deduction;
  • Convert the mortgage interest deduction to a credit;
  • Phase out exclusion for capital gains on sale of principal residence;
  • Make permanent the deduction for mortgage insurance premium payments;
  • Extend exclusion from income for cancellation of certain home mortgage debt;
  • Repeal the Low-Income Housing Tax Credit (LIHTC);
  • Replace the LIHTC with an equivalent reduction in tax on rental income;
  • Reform or expand the LIHTC; and
  • Create a non-refundable tax credit for low-income renters.

The paper lists other policy options for state and local financing, tribal financing, community development, and state and local tax uniformity.  

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