A Look Inside the Super CommitteeThe GOP opposes raising tax rates, but one idea being considered is limiting deductions as a percentage of income.'I can find $1.5 trillion of budget savings in my sleep," says Jeb Hensarling, the Republican co-chairman of the 12-member deficit reduction committee. "The hard part is getting six Democrats to agree to do it."
If he can't, there will be no consensus on a plan to reduce deficits over the next decade and the so-called super committee will surely blow up, just as most on Wall Street and in Washington are betting will happen. To beat the statutory deadline for a congressional vote before Thanksgiving, a deal, if there is one, will almost surely have to be struck by the end of this week.
Insiders on the panel say that the deal being offered by Democrats is less than $1 of spending cuts for every $1 of new taxes. Democrats want to count the $900 billion of discretionary spending cuts already agreed to in the debt bill and $1 trillion in troop withdrawals from Afghanistan and Iraq, which may not happen. Meanwhile they are insisting on close to $1.2 trillion of tax increases in exchange for less than $1 trillion in entitlement reforms. The president's own deficit reduction committee, Simpson-Bowles, offered $2 of cuts for every $1 of new taxes. The GOP House budget passed last spring contained some $4.5 trillion in cuts—three times more than the super committee must find.
Democrats also keep pressing for higher tax rates on the rich. "We have no intention whatsoever of raising tax rates—period," Mr. Hensarling states emphatically.
But raising rates and raising revenues are different. Eliminating loopholes in exchange for making the Bush tax cuts permanent after 2013 is on the table—and by broadening the tax base, this could bring in tens of billions of new revenues each year. Says Mr. Hensarling: "Republicans want more revenues. We want more revenues by growing the economy; we're not happy with revenues at 14% of GDP, but we don't want to do it by raising rates."
One positive development on taxes taking shape is a deal that could include limiting tax deductions, perhaps by capping write-offs on charities, state and local taxes, and mortgage interest payments as a percentage of each tax filer's gross income. That idea was introduced on these pages by Harvard economist Martin Feldstein.
In exchange, Democrats would agree to make the Bush income-tax cuts permanent. This would mean preventing top rates from going to 42% from 35% today, and keeping the capital gains and dividend tax rate at 15%, as opposed to plans to raise them to 23.8% or higher after 2013.
And there is some indication that corporate rates might actually be pushed lower. Republicans would agree to a broader tax base and Democrats would accept a rate of between 25% and 28%, down from 35% now.
One member of the committee tells me on background that this means getting rid of certain deductions, including immediate write-offs of capital purchases, write-offs for interest expenses, and green energy subsidies in the tax code that can drive effective tax rates down to zero for major U.S. firms. He says this is an area where progress is being made.
Democrats also keep pressing for higher tax rates on the rich. "We have no intention whatsoever of raising tax rates—period," Mr. Hensarling states emphatically.
But raising rates and raising revenues are different. Eliminating loopholes in exchange for making the Bush tax cuts permanent after 2013 is on the table—and by broadening the tax base, this could bring in tens of billions of new revenues each year. Says Mr. Hensarling: "Republicans want more revenues. We want more revenues by growing the economy; we're not happy with revenues at 14% of GDP, but we don't want to do it by raising rates."
One positive development on taxes taking shape is a deal that could include limiting tax deductions, perhaps by capping write-offs on charities, state and local taxes, and mortgage interest payments as a percentage of each tax filer's gross income. That idea was introduced on these pages by Harvard economist Martin Feldstein.
In exchange, Democrats would agree to make the Bush income-tax cuts permanent. This would mean preventing top rates from going to 42% from 35% today, and keeping the capital gains and dividend tax rate at 15%, as opposed to plans to raise them to 23.8% or higher after 2013.
And there is some indication that corporate rates might actually be pushed lower. Republicans would agree to a broader tax base and Democrats would accept a rate of between 25% and 28%, down from 35% now.
One member of the committee tells me on background that this means getting rid of certain deductions, including immediate write-offs of capital purchases, write-offs for interest expenses, and green energy subsidies in the tax code that can drive effective tax rates down to zero for major U.S. firms. He says this is an area where progress is being made.
http://online.wsj.com/article/SB10001424052970203716204577017640028084180.html?mod=WSJ_Opinion_LEADTopSo, $15 trillion in debt and they still can't come up with more than $1 in spending cuts for every $1 in taxes. It's clear that these people don't give two fucks about fixing out economy and are fully intent on spending us into further insolvency.
That funniest part about this is that at the end of the day the Simpson-Bowles plan will still be better. Imagine if Downgrade had actually listened to their suggestions. Would probably be headed for reelection instead of heading for the unemployment line.
