Deficit Commission Releases Tax and Budget Proposals to Address Fiscal Crisis
Recommends Both Eliminating Tax Deductions and Cutting RatesWashington, DC, December 2, 2010 - This week the White House deficit commission released its long-awaited report, "The Moment of Truth," to an eager audience of pundits, policymakers, and the general public. Recommendations include cuts in discretionary spending, fundamental reform of the federal tax code, and changes to Social Security. The major elements of the plan are summarized in the new publication, "President's Deficit Commission Says Federal Government Should be 21 Percent of GDP," No. 253 in the Tax Foundation Fiscal Fact series.
"The tax-related provisions in the commission's report call for both eliminating deductions and exemptions - which would raise some of the revenue needed to shrink the deficit - while cutting rates overall, which is consistent with the principle that taxes policies should emphasize a broad base and low rates" said Tax Counsel and Director of State Projects, Joseph Henchman, who authored the report.
"Eliminating the current tax code's many special preferences for particular groups has already proven controversial, but systematic reform and simplification remains a sound goal that will provide long-term economic benefits far beyond the immediate need to reduce the federal budget deficit," Henchman said.
The National Commission on Fiscal Responsibility and Reform estimates that its plan will reduce deficits between 2012 and 2020 by almost $3.9 trillion, with the majority of savings coming from spending cuts, with about one-fifth coming from changes to the tax code.
The Commission's report also suggests several "process" reforms that would standardize the way the federal government estimates inflation, change the conditions for extending unemployment benefits, and create a process for enforcing deficit reduction targets.
"The Commission also made a point of emphasizing changes in business tax treatment that aim to improve international competitiveness," Henchman said. "Ideally, this would reduce the comparatively high statutory rate imposed on the worldwide income of U.S. firms, while bringing the system in line with other countries."
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
Posted: December 3, 2010
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