Obama Debt Panel Plans
$2.4 Trillion in Post-Election Tax Hikes
ATR has been saying for months that the Simpson-Bowles Obama "debt commission" is merely a ruse to push a tax hike plan after the election. Now, according to published reports in the Wall Street Journal, that seems to be the case:
Sacrosanct tax breaks, including deductions on mortgage interest, remain on the table just weeks before the deficit commission issues recommendations on policies to pare back with the aim of balancing the budget by 2015.
The tax benefits are hugely popular with the public but they have drawn the panel’s focus, in part because the White House has said these and other breaks cost the government about $1 trillion a year.
At stake, in addition to the mortgage-interest deductions, are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter.
Let's take this at face value, and assume that these are the "$1 in tax hikes for every $3 in spending cuts" promised by Bowles and supported by Senator Judd Gregg (R-N.H.) What's the income tax hike envisioned here?
For that, we turn to the "tax expenditure" section of the President's budget. Here's the results (all figures are five-year scores from FY 2011-2015):
- Mortgage interest deduction: $638 billion
- Child tax credit: $60 billion (this is only the revenue loss, not the outlays)
- Exclusion for employer-provided health insurance: $1.054 trillion (plus $613 billion in higher FICA taxes)
So, altogether we're talking about a five-year tax hike in the neighborhood of $2.4 trillion. This is a pretty good proxy for the ten-year CBO/JCT score given the fact that the report says these will be curtailed, not eliminated.
Getting rid of these tax credits and deductions might be a good idea in the context of revenue-neutral (or tax-cutting) comprehensive tax reform--but that's not what's on the table here. This is a pure tax hike, plain and simple. There's no doubt that the government would spend all the new money, as well. We'd end up with higher taxes and higher spending, just like after the 1982 and 1990 budget deals.