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TAX REFORM COMMITTEE: TRIM MORTGAGE, HEALTH DEDUCTIONS; NO NATIONAL SALES TAX

October 12, 2005

From today's edition of Tax Analysts Taxwire:

The President's Advisory Panel on Federal Tax Reform on October 11 ruled out proposing a dramatic replacement system and instead will use the framework of the current income tax base to make major changes, including curbing benefits for housing and healthcare. Scaling back the benefits would simplify the tax code and would help finance repeal of the alternative minimum tax, which would cost $1.2 trillion over 10 years, the panel said.

The "FAIR Tax," a version of a national sales tax, has achieved some support and has spawned a best-selling book. I never thought a sales tax with a rate exceeding 35% made much sense, and the panel apparently agreed.

It will be fascinating to watch the debate over limiting mortgage interest and health cost deductions. While there are many good arguments for limiting these deductions, and many more for killing the AMT, the lobbying against such proposals will be ferocious. I also expect the deduction for state and local taxes to come into play, given that it is the biggest single AMT trigger in high-tax states like Iowa.

UPDATE: Color Prof. Maule unimpressed:

With this sort of work product, the panel should refund to the taxpayers the public funds it has wasted. Charged with reform, this panel seems dedicated to window dressing that masks maintenance of the status quo for their friends and financial backers. America is being short-changed.

Links:

Tax Policy Blog

Washington Post (Hat tip: Reader HH).

New York Times

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