With only two weeks to go before a November 23 deadline, the congressional “supercommittee” of 12 that has been negotiating over cutting the budget deficit is now considering some far-reaching tax reform proposals.
Until recently, the six Republicans on the joint committee had resisted any tax revenue increases. But now they have reportedly brought forward a plan to cut the top tax rate from 35 percent to 28 percent in exchange for eliminating or limiting a host of deductions, including for mortgage interest, state and local taxes, and perhaps charitable contributions. Altogether, the changes would raise $300 billion in income tax revenue over the next 10 years, according to Fox News.
Other parts of the Republican proposal reportedly include gradually raising the Medicare eligibility age to 67, and increasing Medicare premiums and aviation security fees.
There would also be about $700 billion in spending cuts, including lower cost-of-living adjustments for Social Security, and cuts in the growth of Medicaid and Medicare for the poor and disabled.
Other sources of revenue and deficit reduction would come from auctioning off wireless spectrum and lowering interest rates on the debt.
The goal of the supercommittee, which was formed after the debt ceiling deal forged by the Obama administration and Congress over the summer, is to come up with about $1.5 trillion in deficit reduction over the next decade. If the members of the joint committee don’t agree on a plan by Thanksgiving that can be submitted to Congress for an up or down vote, $1.2 trillion in automatic spending cuts would be triggered in both defense and non-defense programs, according to Bloomberg Businessweek.
Despite the movement by Republicans on tax revenues, Democratic lawmakers are not expected to go along with the proposals. Effectively lowering taxes on high-income earners, while cutting programs for the poor and elderly, would not go over very well with most voters next November.
While the movement on tax revenues would seem to be a welcome sign, it does seem strange for a deficit reduction committee to be considering a reduction in tax rates, especially with the deadline for a deal approaching so soon.
There will surely be a lot of maneuvering in the next two weeks as the members of the supercommittee try to reach an agreement. Otherwise the fallback option would be deep automatic spending cuts in programs considered sacred by both parties, and perhaps a return to the Clinton-era tax rates of up to 39.5 percent in 2013.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access