Recently, we released an analysis demonstrating that it is indeed possible to substantially reduce tax rates while still cutting the deficit. Despite some claims that repealing all tax expenditures could reduce the top rate to only 38% (or by only 4 percent), we showed that doing so would allow the top rate to fall to 23 percent while still allowing for over $1 trillion in deficit reduction.
After we analyzed a part of it two weeks ago, Governor Mitt Romney's tax plan is back in the news, with a proposed deduction cap as the subject of a new Tax Policy Center study. He had mentioned a $25,000 dollar cap on deductions as a possibility in his tax plan during the debate Tuesday night and has previously proposed a $17,000 cap.
Senator Tom Coburn (R-OK) yesterday released his "Wastebook" for 2012, a laundry list of government waste and inefficiency. Coburn finds 100 examples of government spending clearly not serving its designed purpose.
Wastebook's examples include:
Update: Clint Stretch at Capital Gains and Games sketches out possibilities for base broadening in Gov. Romney's plan.
Yesterday the group Taxpayers for Common Sense released a report with over $2 trillion in deficit reduction. The report, "Sliding Past the Sequester," takes up the task of the Super Committee and puts forth a list of cuts to programs or measures that they deem are "inefficient, ineffective, or wasteful," adding up to $800 billion beyond the Super Committee's original requirement.
In a Project Syndicate piece, former Chairman of President Reagan's Council of Economic Advisors Martin Feldstein reminds us about another idea to raise revenue from tax expenditures. Instead of going through each preference and figuring out the best course of action, it might be effective--and potentially politically easier--to cap the overall benefits taxpayers receive from tax expenditures.
When we talk about tax reform which lowers the rate and broadens the base, the base-broadening portion of the equation usally focuses on tax expenditures. These deductions, exclusions, credits, and special rates are considered a departure from the normal tax code, and so a number of proposals have focused on reducing or eliminating them.
Today, the third forum of the "Strengthening of America—Our Children's Future" series was held in New York City on "The Challenges of Pro-Growth Tax Reform." Commenting on taxes as well as our unsustainable debt path were two panels; the first featuring notable economists Martin Feldstein and Lawrence Summers, while the second made up of business leaders—Honeywell CEO and Fiscal Commission member David Cote, CEO of SEI and Chairma
Last week, we featured a piece by CRFB Senior Policy Director Marc Goldwein discussing one option to reduce tax rates while maintaining progressitivity and raising $1 trillion in revenue: eliminating the special rates for capital gains along with other deductions. In theory, a lower tax on capital gains might be preferred in order to incentivize savings.