Obama’s bipartisan commission suggests Deep Cuts in Tax Breaks and Spending

Feb 2007
34,677
17
Los Angeles
#1
A draft proposal to be released Wednesday by the chairmen of President Obama’s bipartisan commission on reducing the federal debt calls for deep cuts in domestic and military spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.



The plan would reduce Social Security benefits to most future retirees — low-income people would get a higher benefit — and it would subject higher levels of income to payroll taxes to ensure Social Security’s solvency for at least the next 75 years.



The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments — so that income tax rates could be reduced across the board.



Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.



Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.



But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.



Under Mr. Obama’s executive order last February creating the panel of 12 members of Congress and six private citizens, 14 of the 18 commissioners must agree in order to send any package to Congress for a vote in December. The Senate majority leader, Harry Reid of Nevada, and Representative Nancy Pelosi, who will remain the House speaker until January, have promised in writing that the Senate would vote first and, if it approves a plan, the House would vote as well.



Should the package of proposals fall short of the necessary 14 votes in the deficit commission, as many people expect, proponents of deficit reduction, including some administration officials, hope that at least some of its recommendations could be the basis of efforts to pare deficits once the economy fully recovers.



The chairmen’s proposals, and other deficit reports coming out soon from other groups, will present a challenge also to Congressional Republicans by challenging their contention that the budget can be balanced by spending cuts alone — a claim that even many conservative economists and budget analysts reject, given the scale of projected debt as the Baby Boom generation retires and claims federal benefits.



The commission plan aims to bring federal spending and revenues roughly in line by fiscal year 2020. Spending would be 22 percent of the nation’s economic output by fiscal year 2020 – slightly higher than in past years, but reflecting the growing costs of retirement and health benefits for an aging population – and revenues would be about 21 percent, to create a surplus that year.



By comparison, in the fiscal year 2010 that ended Sept. 30, spending was 23.8 percent of gross domestic product and revenues were 14.6 percent – reflecting the one-time stimulus spending costs and the loss of tax receipts amid high unemployment and slack business activity. That produced a deficit for the year of 9.1 percent of GDP, bringing the public debt to a size equal to 62 percent of the economy.




http://www.nytimes.com/2010/11/11/us/politics/11fiscal.html
 
May 2008
6,766
0
#2
This should be a fun session of congress, just to see who is the first to blink with all the talk of size of government. My bet is not one Republican will agree to the exact language of the proposals by a Dem heavy commission.
 
Feb 2007
34,677
17
Los Angeles
#3
Zack said:
This should be a fun session of congress, just to see who is the first to blink with all the talk of size of government. My bet is not one Republican will agree to the exact language of the proposals by a Dem heavy commission.




Eventually they will have to accept that it will take both spending cuts AND tax increases (maybe via fewer deductions) to reduce the deficit.



Everyone, including Republican voters, supports reductions in govt spending - until those reductions affect them personally.
 
May 2008
6,766
0
#4
garysher said:
Eventually they will have to accept that it will take both spending cuts AND tax increases (maybe via fewer deductions) to reduce the deficit.



Everyone, including Republican voters, supports reductions in govt spending - until those reductions affect them personally.
I think a good start would be to close the Dept. of Education, end unions in the federal worker program and require government workers to contribute to an IRA retirement system and contribute to Social Security just like everyone else. The Dept. of Education does absolutely nothing but send unfunded mandates to the states so close it and federally fund the unfunded mandates with the savings.
 
Feb 2007
34,677
17
Los Angeles
#5
Zack said:
require government workers to contribute to an IRA retirement system and contribute to Social Security just like everyone else.


They don't contribute to SS now?



I didn't realise.