Wednesday, November 10, 2010

The Deficit Commission (Bowles--Simpson) Speaketh

President Obama's Deficit Reduction Commission--co-chaired by Erksine Bowles of the Clinton administration and former Senator Alan Simpson (R-WY) brought forth their first recommendations today--and the report was nothing if not breathtakingly audacious by Washington standards. There were numerous budget-cutting proposals such as an increase in minimum age for full Social Security benefits to 69 by 2075 and a three-year freeze on most spending which brought catcalls from the more liberal parts of the Democratic House and Senate. Nevertheless, the more salient part of the proposal for this post was the tax language. A la 1986 rates would be lowered and limited to three rates, but virtually all deductions and credits, including the popular mortgage interest deduction, would be eliminated.

It is probably wise for the chairmen to claim this as a starting point--even given the results of last week's election, there is little chance that the present proposal will survive intact. While the proposal deserves high praise for attempting to simplify tax law, I am somewhat concerned that the proposal appears to eliminate deductibility of charitable deductions. Given the present shaky economy, the not-for-profit sector needs to grow, not shrink.


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