We’re a little over a month away from the recommendations of the cat food commission, and while they are expected to fall mainly on the spending side, Damian Paletta sees the possibility of a number of tax expenditures falling by the wayside.
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.
The officials are also looking at potential cuts to defense spending and a freeze on domestic discretionary spending. It is unclear if the 18-member panel will be able to reach an agreement on any of the items by a Dec. 1 deadline.
There are politicians on the panel, right? Current politicians, who have to face voters again in their lives? Then count me out of expecting that the mortgage-interest deduction will be on the chopping block.
For the record, there’s no reason why second homes should get a mortgage-interest deduction, and a credible case to be made to cap the deduction for primary residences. But there’s no question that the usual suspects would characterize that as a tax increase. Same with the other tax expenditures mentioned there, and defense spending cuts would also come in for some criticism from the same sources.
We’re in the middle of a foreclosure crisis, where banks are seizing homes without proper documentation, and the watchword from the establishment is that we cannot stop this because it would crush the housing market. Under that logic, how would removing the greatest tax benefit for home ownership not do exactly the same thing?
Interestingly, Paletta claims that the commission will “steer clear” of tax reform, Medicare, Medicaid and Social Security in their short-term recommendations, which is a total reversal of expectations from most circles. Paletta claims that the talks have shifted away from this in recent weeks. But this is the most interesting part, and now that I think of it the most likely:
Committee officials plan to try to broker a deal in November, after the midterm elections. They have until Dec. 1 to win the support of 14 of the commission’s 18 members to endorse a final report. It is possible that the panel’s Democrats and Republicans would issue separate reports if they can’t agree, people familiar with the process said.
What would be the obligations of Congress in terms of a vote, under that scenario? Would they vote on each plan separately? Would they move into the committee process with the separate plans?
Amusingly, the panel is not expected to mention the biggest driver of the deficit in recent years and (along with Medicare and Medicaid) in the future, the Bush tax cuts. That shows how unserious a deficit commission it really is. But apparently, the efforts in progressive circles have at least temporarily beaten back the drive to cut retirement benefits.




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By the way, the GOP doesn’t plan to play nice if it wins the House.
It’s never going to happen, but cutting or at least significantly limiting the interest deduction first homes makes a lot of sense. Given the currently low interest rates and the low top marginal tax bracket, the savings are not what they were 15 years ago; and low income people don’t benefit from them anyway, because they are a deduction, not a credit. The whole thing is just a subsidy to builders, and they aren’t going to be building anything for a long long time.
The GOP has never planned to play nice. The only people to think otherwise are David Broder and Barack Obama.
This concerns me. With all of the thought that goes into these prepared statements, the use of the phrase “short-term” is probably an indicater that there will be long-term cuts to Social Security.
A week or so ago, there was a link to a report showing that home ownership did not lead to an increase in the standard of living, in fact the opposite. In
Europe the numbers of people who own their homes is a significant percentage less than in the US. Yet, we continue to promote the idea that home ownership is the best thing ever.
This has been a policy of the US forever. Why would anyone try to buy property in this environment?
The solution is so simple! I simply do not understand why it needs a commission. Get corporations to pay taxes AND lift the cap on FICA(social security) taxes. Voila! The commissions work would be done! Everybody could go home early.
How much money could we save by closing about 90% of our overseas military bases? The need for NATO died with the Soviet Union, as did the need for bases in most countries in Europe.
Sorry, but I can’t take the Catfood Commission seriously until they start looking at the number of offshore bank accounts bleeding this nation dry.
When a single address in Bermuda or the Caymans is the legal address for over 1,000 ‘businesses’ — none of them required to pay US taxes — then the whole work of the Catfood Commission is blather, as far as I’m concerned.
Darrel Issa’s already got an itchy subpoena finger. I shudder to think…
Ding.
But we need a lot more fully-equipped aircraft carriers for all those ocean-going battles we have with al-Qaeda.
David, as the time for the Catfood Commission’s “report” draws closer, I’d like to suggest to any of you who get interviewed — particularly Jane — that you say the full name of the Catfood Commission first [I can't even remember what it is] and then say, “the Catfood Commission.”
I noticed in Jane’s last, very good interview, that she just mentioned “Catfood Commission.” I think there are unfortunately all too few people who know that this term refers to Obama’s fraudent task force.
I think we need to do everything we can to link the “real” name of the commission [because that's how it's going to be named in the press] to its “true, indicative of purpose” name.
Is it a plan to release all this ugly shit so that when the final report only increased the retirement age to 70, everyone breathes a sigh of relief?
Well, hey — 70 is the new 50, isn’t it?
/s
For the indentured servants.
We would have all the money we need if the stopped trying to change the Middle East and brought all troops home.
But but but… The U.S. is the only honest broker… /s
“Amusingly, the panel is not expected to mention the biggest driver of the deficit in recent years and (along with Medicare and Medicaid) in the future, the Bush tax cuts. That shows how unserious a deficit commission it really is.”
This commission is serious. Unfortunately, it’s serious about doing some really not-so-good things.
We’d at least not being borrowing insane amounts of money from China and Japan to fund the wars. I wonder how much money the warmongers would have raised by selling war bonds like we did in WWII.
“Government is just the entertainment division of the Military Industrial Complex”
Frank Zappa
I think if eliminating the cap on income for SS contributions included language that funneled the excess monies (those monies not needed to fund social security benefits) into the general congressional budget, we could make some ground on this plan. We could eliminate a large chunk of the defecit this way.
Blue Texan’s regularly scheduled post is up: Rand Paul Even Creepier Than Previously Thought
ending the imperialistic wars, making corporations pay a larger share, closing corporate loopholes will do more and be far more popular than ending some of the popular personal deductions.
Changing horses in mid-stream around personal mortgage deductions will enfuriate the populace.
Let’s see who protects corporations vs the people….
I’d favor a Constitutional amendment prohibiting all tax loopholes and a reduction in all tax rates to result in a revenue-neutral change to create a fair tax system. I like my mortgage deduction, but it’s nothing compared to the highway robbery huge corporations commit with the help of tax loopholes they’ve lobbied Congress to pass.
The reason for the cap on FICA is because there’s a cap on SS Benefits.
Bill Gates pays in FICA on his first $106k, and when he retires he’ll get the max benefit, about $2000 a month just like everybody else. The argument goes, if there’s no limit on pay-in, there should be no limit on pay-out.
Otherwise it becomes welfare, with the rich paying in and the poor taking out.
David Walker actually signaled this a couple of months ago, and Christina Romer’s NYT piece is the latest iteration of this: we won’t cut Social Security now, but in “x” number of years when the economy’s better.
It’s what they’ve always been planning — cuts start taking effect in 5 years or so, and wouldn’t affect current retirees. It’s the 40-55 year olds who get screwed.
This is just the latest sales job. More of a repackaging than anything else.
Your eyes may look likes his, but, baby in your mind, you don’t know where it is.
Using data from fiscal year 2005, the Pentagon bureaucrats calculated that its overseas bases were worth at least $127 billion, so 90% would be about $114B.
Not exactly what you asked, but…
a pre-election head fake. Don’t be deceived.
Cuts to SS and Medicare plus ending the mortgage tax deduction?
Who was that guy on BookSalon yesterday who was talking about revolution?
Safe bet: Most if not all members of the Catfood Commission hold one or more of those Cayman Island addresses.
Safe bet: “Short Term” means “If you’re 55 or older, we won’t cut your benefits. Everybody else gets to suck it.”
I don’t know that the Filipinos paid us a dime for all that property when they asked us to leave the PI. The Vietnamese certainly didn’t. Just maintaining overseas bases costs us a fortune – payrolls, equipment, infrastructure.
I think you are going to find it is ALL on the table. And NONE will get done. Why anyone is worrying about this, I don’t know. Nothing is going to get done.
When the lights begin to go out, THEN something will happen. Not before.
Unfortunately, Obama is already talking about cutting entitlements– which we know, of course, that SS isn’t — but that won’t stop him.
It only makes sense to the deadbeats who aren’t paying their mortgage payment anyway. If don’t make your payments you can’t deduct the interest on the mortgage.
I have seen one plan I like to refer to as the 50/50/70 plan. It cuts benefits by 50% to those now under 50 years old and it raises full retirement age to 70 for this same group.
It is a solid plan and I am supporting it. I urge you to do the same.
I agree with you on that one. Don’t think the cap should be raised unless there’s some increase in the maximum benefit.
But any comment I make about ss, I premise it with the fact that as is, the system will be able to pay out 100% of benefits until 2037, and then 75%-80% thereafter–at least as per the CBO.
Assuming that’s true–and I have no way of knowing whether it is or isn’t–a 1 percentage point increase in the Fica tax spread out over the next 27 years (i.e., a 1/27th of 1 percent increase each year until then) would, according to “experts” allow ss to pay full benefits as far as the actuaries can see.
When the Commission gets down most of you people will only be able to afford cat food on Sundays.
The Peter G. Petersons and their ilk are trying to stir up a generational war: they are telling older folks, ‘no worries, the reduced benefits and raised retirement ages will fall on the shoulders of the young.’ They are telling younger folks, “Look, there is no money in the Trust fund, just bonds!” as if there was no money there anymore and then saying, “You young folks are going to have to pay for the old folks Social Security, since there is no money there.” President Obama has done little to dispel either of these messages. It is all a bunch of lies. It demeans current and future beneficiaries. It creates distrust in youth and anger at older people who don’t deserve that. And it pisses me off.
Tangential– For those who had no mortgage (they owned their homes free and clear) but a bank forcibly possessed their home, 1) how many are there of these cases, 2) how (e.g., does the wronged party receive a cash value, the asset back [that could be a problem if the bank didn't maintain it] or get to choose a combination) and by what process, should these people be made whole if there’s bunches of them?
Note to Fuego Tech Pups: The date and time indicator on my comment bar gives the wrong date and time of “September 10th, 2007.”
And the Bush tax cuts? The low tax on capital and the high tax on labor?
I see a quandry regarding corporate taxes.
Businesses raise prices to cover the cost of the taxes they do pay.
In the end, a corporate tax is just a price hike on the consumer.
If there were no corporate taxation, businesses would just horde cash indefinitely, and they would never pay any tax on that money..effectively holding the economy hostage.
Corporate taxes must discourage businesses from hording cash and assets, while still allowing businesses to save money for large expenditures such as building new facilities, disaster recovery, retirement accounts, etc.
I am not literate in corporate tax law, but I have no reason to believe it is any more sane than other tax law.
The quandry is how to tax business in such a way that
1) no undue burden is placed upon low-income households;
2) businesses are discouraged from sitting on cash;
3) businesses are not penalized for some kinds of savings;
4) we avoid countless loopholes in the effort to achieve 1, 2 and 3.
Thanks for the feedback. Just to clarify, are you talking about the date and time next to the commenter name above the comment and, if so, is the wrong date displaying on all comments or just yours?
DITTO
Corporations do not pay taxes..Corporations are individual stockholders.
Any and all taxes any corp. pay are charged to its customers, you and me; we are who, in the end game, pay the taxes.
Where is the Stop the Damn Wars!!!, effort?
This whole thing is total bull, and I cannot believe the silence around the main issue that’s breaking the back of America.
I see your point, but the economy is a big cycle, making any tax a tax that gets “passed along” in some way. Income tax increases the amount employers have to pay to give their employees the net amount they need or desire. You never hear Democrats mention this fact, but it’s a good point…especially when you talk about income tax cuts.
If you cut income tax for middle- and lower-income workers what eventually happens over time is the employer just keeps that money by reducing wage increases. The worker will keep working because he/she got a net “raise” after the cut, and doesn’t demand one from the employer for a few years.
Corporations should be paying a reasonable tax on their profits. The complaint that taxes on dividends amount to “double-taxation” may have more merit…but even then, the transfer of money from any one entity (such as a corporation) to any other (such as a shareholder) can reasonably be subject to a separate tax in my opinion. Plus, I don’t believe capital should be taxed less than labor, on principle.
“Besides the mortgage-interest deductions, the newspaper reports that the child tax credits and pre-tax spending by employers for health insurance could also be killed. Commission officials are expected to look at preserving these breaks but at lower levels, people familiar with the matter told the Journal.”
So middle class tax breaks are killed as marginal tax rates on the rich are not increased, and
Social Security is cut by 20% by a new retirement age but since age 70 full retirement age is phased to be totally in effect by 2040, and since we are killing the standard of living preserving wage index for calculation of benefit in favor of a lower than standard calculation of cost of living index – another 20% decrease – that is phased in by 2040, we get a 40% reduction to Social Security benefits while the do nothing solution has SS reduced only 25% – paying 75% of benefits in 2040 – I prefer do nothing.
Meanwhile the real need – national health with cost controls and a national budget setting reimbursement rates foe basic service – what ever other country has in place – is not on the menu because the insurance companies have bought both GOP and DEM members of the commission.
Well, since the goal was for the rich to never pay back the loan they took from Social Security’s Trust Fund to cover the cost of the deficit financed Bush tax cuts for the rich, the commission has done a great job – and even if separate Dem and GOP reports – the reports have been approved by the rich and corporate. GOP has announced that screw governance, Obama as a one term president is the GOP goal post election 11/2010 – and I do not see that the GOP has much they need do to accomplish that goal. The base will not stay home in 2012, but the top line of the ballot may be left blank by a lot of folks.
The issue isn’t about funding Social Security (the government can always spend money into creation without taxing or borrowing) but rather that SS FICA taxes are terribly regressive in that they just stop at $106k. Heck, you could just allocate the uncapped amount above $106k to Medicare.
You said, “I have seen one plan I like to refer to as the 50/50/70 plan. It cuts benefits by 50% to those now under 50 years old and it raises full retirement age to 70 for this same group. It is a solid plan and I am supporting it. I urge you to do the same.”
Do you realize that most workers have no pension plan and many have no benefits at all? Social Security will be the only safety net these people have. If the average payment is $1200 a month, then you are proposing cutting it to $600 a month and a retiree won’t see anything until they are 70 years old.
I assume it’s okay with you if tens of millions end up on welfare and food stamps (and live under bridges). But the Federal government won’t have to deal with that–instead the states will. However, your state taxes and fees will skyrocket to cover the costs. So the plan you favor solves nothing. The easiest and quickest solution is to immediately double the cap.
Well, at least the Cat Food Commission seems a lot more harmless than those ex-Senators in Vanity Fair who wanted to cut taxes for the rich and eviscerate Social Security and Medicare.
We need serious tax reform on the table though. The income tax is so riddled with loopholes and interpretive guidelines about what constitutes “income” and when it has to be repatriated that it’s a joke. The only ones that love the current system are accountants and lawyers.
Maybe a more progressive version of the Fair Tax could be put on the table, with additional exemptions that help the poor (or a higher prebate beyond poverty level) and a capital gains tax?
We really should be trying to raise revenue from the underground economy, if we’re not prepared for massive defense spending cuts.
Sounds like a good start..we must begin dismantling the entire entitlement mentality of this country. Personal responsibility !!!!!
Perhaps they will do their job and think for themselves… what being elected and all.
People who bought at the height of the bubble (assuming they are not already handing the keys to the bank) would be out on their ass.
They pay the biggest cost for housing, and the cost for interest in the first 3 years of a 30 year loan is about 88% interest.
Sounds like some great stimulation.
The boomers thought the powers that be were going to give them a pass, but everyone got screwed. Sounds like the know enough not to go back and screw them over again given that age group makes up the majority of voters.
So they will double screw the kids and the grandkids instead.
No, thats the media… I mean the news media.
–
Tinman, I am slow. I only just now realized you were a performance artist.
Are you in CA? If so, Prop 19 hasn’t passed yet. Unless you’ve got a doctor’s note for that shit you’re smoking, you’re in deep trouble.
What do you think the Catfood Commission was created for, other than “to cut taxes for the rich and eviscerate Social Security and Medicare”? That’s the commission’s sole reason for existence.
If corporations don’t actually pay corporate taxes…why are they always bitching and moaning about the corporate tax rate? Businesses price goods based not on a “cost plus” model, but on the basis of what the market will bear. Prices often simply can’t be raised to cover a tax bill. If they could, this raises the question of why the company wasn’t charging the higher price in the first place.
Furthermore, I believe corporate taxes are paid out of net profits. Therefore, if the company isn’t making money, they don’t pay a tax. An increase in the effective tax rate will increase the amount of profit that goes to the government, not reduce the amount of net profit. By definition, the corporation has this money available to pay the tax without raising prices.
Lastly, the whole point of a corporation is to act as a legal entity shielding individual shareholders from liability. This legal fiction is created to promote risk taking. But it comes at a cost to the shareholder: the corporation as a separate legal entity can be taxed as such. Shareholders that don’t like this arrangement are free to enter business relationships outside the structure of a corporation…but if thier business goes under it can take their personal assets with it. Their choice.
The point is: LOTS will get proposed. NOTHING will get done.
This commission is all an exercise in pablum for the masses. It makes people think something is being done, when, actually, nothing is being done.
There is no sense getting all worked up about a commission whose report will be trumpeted and then shit canned.
Sometime in the future, when the lights go out and you go to cash your SS check and it bounces, THEN something will get done. Not before.