On November 10, the co-chairs of the National Commission on Fiscal Responsibility and Reform (the Debt Commission) issued a draft of its proposal to reduce the deficit and to provide for the reduction in the Nation’s use of debt. To view the draft, click here. One of the Debt Commission’s ten guiding principles for its study is to provide a plan for the reform and simplification of the United States Tax Code. The draft report outlines the Commission’s proposal to accomplish the tax reform goal.
Some of the highlights of the Commission’s proposed plan for tax reform include:
- Eliminate the AMT
- Establish 3 tax rates – 15%, 25% and 35%
- Set standard deductions at $30,000 ($15,000 for singles)
- Limit the mortgage deduction to exclude second homes, home equity loans and mortgages over $500,000
- Limit charitable deductions with a floor set at 2% of AGI
- Reduce corporate tax rate to 26% (from 35%)
- Permanently extend the research credit
- Eliminate and modify several business tax expenditures, including:
- Domestic production deduction
- LIFO method of accounting
- Energy tax preferences for the oil and gas industry
- Depreciation rules
- International tax reform including a territorial system
In lieu of the above reforms, the Commission provides an option to defer responsibility for comprehensive tax reform to congressional tax writing committees and to require that such reform be enacted by 2013. In addition to tax reform, the Debt Commission’s draft report includes a recommendation to raise the Social Security age to 68 to ensure its solvency for the next 75 years. This is sure to be a contentious issue.
The Debt Commission is to issue its final report on December 1. A minimum of 14 of its 18 members must agree to the final plan in order for it to be sent to Congress for consideration. It will be interesting to contrast the final report with the draft issued November 10. For further information on the draft, please contact Ron Kramer at firstname.lastname@example.org.
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This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.