Tuesday, January 17, 2006

BW's Gleckman: Common-Sense Simplification

Howard Gleckman reviews the history of the itemized deduction (Pease) and exemption (PEP) phase-outs, starting with Bush 41s fatal acceptance of a tax hike in 1990. The Pease and PEP provisions were viewed as ways of hiding the tax increase. In 2001, Congress relooked at these phase-outs in tax cut legislation and decided to gradually eliminate the phase-outs but only through 2010. Given this less than glorious history, Gleckman understandably recommends the full repeal of the Pease and PEP phase-outs and a corresponding hike in high-income tax rates.

Gleckman's premise makes a lot of sense. I would add two additional points: [1] while eliminating errors from the 1990s, get rid of the 1993 provision which taxes 85% of Social Security for those with incomes above about $50,000 (thus hitting middle-income retirees). The related 50% provision can perhaps be justified under the premise that most Social Security recipients had half of their funding provided by their employer; there is no reason other than a revenue grab for the 85% rate. [2] look for ways to slow down entitlement spending to make up for at least some of the lost revenue.


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