If recent reports about President Obama’s deficit commission are accurate, taxpayers will be going on a starvation diet while the government steps up to a dessert buffet. From the Wall Street Journal:
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. …
Still, officials have found there aren’t any easy ways to balance the budget, and they are expected to steer clear of more polarizing issues like Medicare, Medicaid, Social Security and a broad rewrite of the tax code in their short-term recommendations. The panel could still make long-term recommendations to change these issues, but they would be less concrete.
As some of you have pointed out before, trying to eliminate the deficit and pay down debt without touching entitlements is futile. Saying “they would be less concrete” is another way of saying “they will never happen.”
What we’ll get to close the deficit, then, will be several hundred billion dollars in individual income-tax hikes (Congress probably wouldn’t get rid of all deductions) and a significantly smaller amount of federal spending cuts. Something like three parts tax hike, one part spending cut.
To put that in perspective, individual income-tax receipts in 2008 totaled $1 trillion. So, we could approach a doubling of that figure — and that’s before the Bush tax cuts expire. Worse, with the spending side of federal budgeting remaining largely unreformed, there would be absolutely nothing to prevent Congress from taking that tax hike and spending even more (borrowed) money.
To paraphrase comedian Chris Rock’s line about taxes, that ain’t a compromise, that’s a jack.
There are good arguments to be made for ending, or drastically reducing, these and other deductions as part of a complete overhaul of the tax code (here’s one of them). But it appears the deficit commission has dismissed the idea of proposing such an overhaul. We’re not getting tax reform, just a tax hike.