Deficit plan offered by senators targets tax breaks for millions but reduces rates for all

[alp227]

Source: Associated Press

WASHINGTON — A new bipartisan plan to reduce government borrowing would target some of the most cherished tax breaks enjoyed by millions of families — those promoting health insurance, home ownership, charitable giving and retirement savings — in exchange for lowering overall tax rates for everyone.

Many taxpayers would face higher taxes — a total of at least $1.2 trillion over the next decade, and perhaps more.

The plan, released this week by the bipartisan “Gang of Six” senators, punts on many of the most difficult issues, leaving it to congressional committees to fill in the details later. But supporters say it provides a framework to simplify the tax code, making it easier for businesses and individuals to comply while eliminating incentives to game the system.

“I think this is an attempt to find a middle ground on taxes that emphasizes keeping rates low and broadening the base as much as possible, and I think that’s a very positive aspect of it,” said Eugene Steuerle, a former Treasury official who worked on the last tax reform package that passed Congress, in 1986.

Read more: http://www.washingtonpost.com/politics/federal-government/deficit-plan-offered-by-senators-targets-tax-breaks-for-millions-but-reduces-rates-for-all/2011/07/21/gIQAaP7DRI_singlePage.html

[hfojvt]

1. bull crap it reduces rates for all

my current rate is 0%. Is it gonna reduce that somehow?

"Simplify" the tax code by reducing the top rate and reducing progressivity. That's what I would expect from a Republican. Fie on any Democrat who pushes that crap.

[karynnj]

9. I don't think they did it, but it is possible to increase progessiveness

by lowering the rates and removing the loopholes. It does not seem that they have actually firmed up the rates for the categories. The AP story says; "The plan would simplify the tax code by reducing the number of tax brackets from six to three, lowering the top rate from 35 percent to somewhere between 23 percent and 29 percent." There is a HUGE difference between 23 and 29 percent.

It will also take a lot of analysis with people simulating what last years taxes would have been for various profiles to really understand the impact. The fact is that NOW the wealthier you are, the more likely you have various strategies to reduce taxes. I am sure that the average effective tax rate now looks NOTHING like the simplistic estimates from just applying the marginal rates.

If this really does eliminate - and keep eliminated - the bulk of the special exemptions, you could actually have a MORE progressive tax structure - when you look at the average effective tax rate for various before taxes incomes.

In your case, if your taxes are zero AND you are not chopping out lots of income with loopholes, nothing here suggests your rate has to increase. Even your mortgage deduction should not change - as I assume, if you are not paying taxes, your mortgage is not over $500,000. (I concede - in advance - that there are not enough details that anyone could really determine the impact on them.)

I think taxes would be far fairer if tax breaks - not the basic deductions - were for the most part eliminated.

[hfojvt]

13. considering how unprogressive it is thanks to the Bush tax cuts

it is quite possible to "increase" progressivity and still not have something very progressive. What I would seek is something pre-Reagan. The only stats I have are from 1986. I have nothing earlier, but even in 1986, the top 1% was paying an average rate of 33% on all their income. You aren't gonna be more progressive than that with a top rate of 29%.

The other thing about loopholes is that they are not infinite. Nor do they really pay. A charitable deduction of $1,000,000 can reduce income and thus reduce taxes, but it still COSTS $1 million.

Plus, say you are a CEO making $1,000,000. By then you are already taking advantage of all the possible loopholes. So if you steal another $5,000,000 or $20,000,000 you will pay the top marginal rate on that. Hence, a higher marginal rate is a disincentive to steal.

Over the last 25 years the tax code has gotten much less progressive. It has not done so because of a preponderance of loopholes. It has done so because the top rate keeps getting cut.

And fewer brackets doesn't really make things any more simple. A taxpayer still just reads the tax table whether there are 100 brackets or three, but flattening it like that is just a way to insure that the middle class pays almost the same rate as the rich.

I am in favor of getting rid of all of Schedule A, except medical expenses, which logically need to be deducted. http://journals.democraticunderground.com/hfojvt/151 but you don't then turn around and cut the top rates. That's absolutely absurd and counter-productive.

[roguevalley]

if they cut mortgage breaks I will lose my house in two years. Cutting

charitable? First they make everyone poor, tell them to use charity and then they cut charity. may they all burn in hell forever. May they never know a happy day.

[Name removed]

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[FreakinDJ]

2. "That could provide a windfall for wealthy taxpayers"

Bush Tax Cuts V2.0

[asjr]

3. A "middle ground on taxes"? I am

so sick of this stuff. Grown men and women who are supposed to work for us are playing tic tac toe with us. It has become a game.

[wysimdnwyg]

8. Sure, middle ground

Of course, this is what passes for "middle" these days:

Progressive .........................................................Middle..Conservative

[No Elephants]

4. LOWER rates for ALL, but take away the few tax breaks Mr.and Mrs. Six Pack get,

like the home mortgage interest deduction?

Who needs the deduction for health expenses, now that we have such a great health care bill?

Who needs retirement savings when OASDI keeps going down?

The one thing they can agree on is sticking it to the working class.

Ain't this kind of bipartisanship grand?



:puke:

[neoralme]

6. There's your little p president.

[karynnj]

10. Home mortgage interest on the amount above $500,000

I know MA, like NJ, is an expensive state, but that is a pretty big mortgage. (Most of the other provisions are not well spelled out as to what they mean. )

[neoralme]

5. So, reading between the lines, they will start taxing all or a portion

of company-paid health insurane; they will eliminate all or part of the interest deduction for owning a home; eliminate the write-off on Schedule A for charitable deductions, and eliminate part of the credit/deduction made for payments to IRA's, 401Ks and other retirement vehicles. This is just another trap.

[roxiejules]

7. Bernie Sanders has a summary of the plan up on his website

http://sanders.senate.gov/newsroom/news/?id=dd367779-8eb7-4298-83ab-7c3b9b2286f5

[karynnj]

11. If his summary is accurate - and he always is - this is a terrible plan

In other posts, I was willing to wait for the details - but these details are really bad - especially as they are completely cutting the deficit with spending cuts. It is better than the Ryan budget, but that is about the best I can say for it. I am surprised at Senator Durbin.