Posted on 10/11/2005 1:38:22 PM PDT by SierraWasp
Health, mortgage deductions eyed
Advisory panel won't urge national retail sales tax
By William L. Watts, MarketWatch Last Update: 3:54 PM ET Oct. 11, 2005
WASHINGTON (MarketWatch) - A presidential tax-reform panel on Tuesday indicated it was ready to urge changes in the tax treatment of healthcare benefits and mortgage interest deductions when it issues its final report in the next few weeks.
Details are yet to be worked out, but members broadly agreed at the panel's penultimate public meeting to explore the possibility of putting a limit on the amount of healthcare benefits that employers would be able to provide workers tax-free.
The panel also leaned toward altering, but not eliminating, the mortgage-interest deduction and other benefits afforded homeowners, including the possibility of lowering the $1 million mortgage-interest cap now in place.
Former Sen. Connie Mack, the chairman of President Bush's Advisory Panel on Federal Tax Reform, said panelists agreed on the need to modify existing housing provisions, while ensuring that the tax code continues to "promote home ownership," while also addressing concerns that the benefits under current rules are "not shared equally."
The nine-member committee, which must deliver a detailed set of proposals to Treasury Secretary John Snow by Nov. 1, also agreed to reject proposals to replace the existing income-based tax code with a national retail sales tax.
Using Treasury Department data, panel member Ed Lazear, a Stanford University professor and a senior fellow at the Hoover Institute, estimated that a national sales-tax rate would need to range between 64% and 87% in order to replace revenues from the corporate and personal income tax while preserving exemptions on drugs, food, clothing and other goods and services typically excluded from state sales taxes.
"I get the sense - I've picked this up since the first meetings we've had - that this is an area the panel does not want to pursue," said Mack, a Florida Republican.
Panel member Timothy Muris argued that putting a cap on health-benefit deductions would help rein in upwardly spiraling healthcare costs.
Under current law, employer-provided health benefits aren't subject to income tax. Capping the deduction would effectively treat the benefits above a certain amount the same as wages.
The panel kicked around the notion of an $11,000 cap, but failed to come to agreement on whether to also limit tax benefits for employers.
Panel members had previously agreed to recommend repealing the alternative minimum tax, or AMT, a tax created in the late 1960s specifically targeted at a handful of wealthy Americans who avoided paying any income tax. The AMT, which was never indexed, threatens to encompass a growing share of the middle class.
But doing away with it leaves a $1.2 trillion hole in future revenues over the next 10 years, forcing the panel to look at measures to offset the hit.
Altering the housing and healthcare deductions would help plug that hole, but it's unlikely the entire amount could be made up through those measures, Mack told reporters after the meeting.
The panel will hold its final public meeting next Tuesday.
William L. Watts is a reporter for MarketWatch.
Two thoughts:
1. If the housing bubble was on the pin, this will certainly shove it into the pin.
2. Believe it or not, a 1 million dollar house in many metro areas doesn't really give you that much (ie - you are not part of the evil idle rich).
These recommendation almost without exception make the problems worse--and institutionalize them even more insidiously.
These people are so tone deaf...another tenet of conservatism butchered by the President...Oh but I realize theres nothing I'm gonna get as an arch conservative out of Bush.
And why exactly should the tax code be promoting (or discouraging) home ownership?
Replace the income tax code with a 20% flat tax, scrap the capital gains tax, halve the corporate tax to 20%.
That would be a start.
These people are so tone deaf...another tenet of conservatism butchered by the President...Which tenet is that? That people's mortgages should be subsidized by the government? If it were up to me I would get rid of the mortgage subsidy (deduction) all together. The government shouldn't interfere in markets.
I second your "BOHICA!!!" even though I don't what it means, but it smacks of incredulity and possibly anger, hence my agreement!
Good golly, this is REFORM??? Is it illegal to whack tax-reform panelists with rubber batons? Quick - we need a law to make it legal - HURRY!!!
I could go for that part. On two different days recently, I had a root canal performed on two different teeth. It took the dentist about 30 minutes both times. When I got the insurance billing documents back concerning what little insurance was going to pay and what I had to pay, I sat down and figured out how much per hour the dentist got if it were on an hourly pay schedule. Each visit, 30 minutes each time, it cost $2,000 for each tooth. That is $4,000 an hour average. Nice work if you can get it I guess.
Not idle rich, but wealthy nonetheless.
"BOHICA!!! They're going the WRONG WAY!!! We wanted tax simplification, Mr. President!!! Git aholt of your Advisory panel, please!!!"
Uh oh, you better just trust them and not criticize the President's appointments, otherwise you'll have 'bots telling you to leave and go to DU!
;)
Meet the new boss it's the same as the old boss! Did anybody really think that the government would reduce the power they have over their subjects?
And why exactly should the tax code be promoting (or discouraging) home ownership?It shouldn't but that was a requirement the president put on the panel.
I believe the article is talking about a coll million in interest, not house price.
Quite true. But that's a bug, not a feature.
BOHICA - Bend Over, Here It Comes Again
Apparently you don't understand what the word subsidy means.
Stealing less of people's money isn't a "subsidy."
I believe the article is talking about a cool million in interest, not house price.
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