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Begin Stirring the Fiscal Pot

At their Tax Policy Blog today, the staff of the Tax Foundation briefly discuss the draft proposals of the President’s Deficit Commission. According to the staff, the proposals “certainly can’t be criticized for timidity." Rather, they say the proposals “are dramatic, as befits our alarming public debt crisis.” They continue by writing:

“No one should be surprised that the commission is calling on the federal government to tax more and spend less. On the spending side, hawks will wince at the defense cuts while defenders of entitlement spending will dislike the higher retirement age and lower cost-of-living adjustments. One line item calls for all earmarks to be eliminated. Federal employee unions will not like the idea of a 3-year federal pay freeze and a reduction in non-defense employment by 10 percent through attrition.

“On the tax side, there are certainly tax hikes for tax-haters to hate: gas taxes, dividend and capital gains taxes, and payroll taxes on high earners. Also, the revenue cap that the chairmen suggest, 21% of GDP, is higher than revenue has been in two generations. Caps do tend to become targets in Washington.

“On the other hand, advocates for fundamental tax reform will be gladdened by the commission's so-called Zero Plan. (The name will launch a thousand jokes). On personal income taxes, the plan suggests three brackets, with the highest tax rate at 28%, matching the top rate that prevailed from 1988-1990 after the last major tax reform.”

Tax Foundation staff conclude saying, ”Overall, the draft released has enough pain to attract numerous denunciations, although hopefully it can be seen as a catalyst.”

The draft of the Co-Chairs’ Proposal is available at the commission’s website (requires Adobe), in essence a 50-page PowerPoint document. Their “five basic recommendations” are:

  1. Enact tough discretionary spending caps and provide $200 billion in illustrative domestic and defense savings in 2015.
  2. Pass tax reform that dramatically reduces rates, simplifies the code, broadens the base, and reduces the deficit.
  3. Address the “Doc Fix” not through deficit spending but through savings from payment reforms, cost-sharing, and malpractice reform, and long-term measures to control health care cost growth.
  4. Achieve mandatory savings from farm subsidies, military and civil service retirement.
  5. Ensure Social Security solvency for the next 75 years while reducing poverty among seniors.

We growled last Friday, “Let the discussions get started. ” Everyone's views on the commission’s proposals will undoubtedly differ, but for the next several weeks, the commission’s proposals will certainly be sucking up most of the available oxygen. Read the proposals without their filtering by the mainstream media, and let's start stirring the fiscal pot.

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