With the debt ceiling lifted, another curtain is raised in Washington as a bipartisan joint committee meets to draft deficit reduction legislation before year end—as part of the Budget Control Act President Barack Obama signed Wednesday.
Under the terms of the debt ceiling budget deal, Congress must pass another $1.5 trillion in deficit reduction by the end of this year or face pre-agreed automatic spending cuts.
A newly released briefing by tax software provider CCH predicts sweeping tax reform legislation the likes of which have not been seen since the 1986 tax reform. In its analysis of recent legislative and tax proposals by Republicans and Democrats, the White House and a bipartisan deficit commission, the Illinois-based tax, accounting and audit information provider argues that fundamental changes in the nation's tax law may be the only way to bridge the divide between Republicans who want to cut taxes and Democrats seeking to raise revenue.
"Changes made under the general banner of tax reform can have the advantage of gaining support from both ends of the political spectrum," CCH said. The result is likely to be a heavy emphasis on reducing or eliminating so-called "tax expenditures," essentially deductions, credits and other tax benefits written into the tax code.
CCH outlines various proposals currently on the table, beginning with Obama's oft stated objective of excluding higher-income individuals—those individuals earning above $200,000 a year or families earning above $250,000—from an extension of the Bush-era tax cuts currently due to sunset after 2012. The White House also seeks elimination of oil and gas preferences, a research tax credit and extension of a payroll tax cut.
While the president has offered few ideas on deficit reduction to date, CCH reports far more specific proposals from the Gang of Six, which included three Democrat and three Republican senators. The Gang of Six's plan, released July 19, offered $3.7 trillion worth of deficit reduction over 10 years. The Congressional Budget Office has never scored this plan, and CCH describes its details as "sparse," but points out that the Gang of Six proposal is the only bipartisan plan to address both spending cuts and tax reform, making it a likely starting point for the work of the new joint committee.
