Now that tax reform and spending “rationalization” are on the front-burner, I wonder why there has been nary a mention of old Simpson-Bowles Report.
You may remember that former President Obama commissioned Simpson, Bowles and a blue-ribbon committee to recommend ways to cut the deficit … and the skyrocketing national debt.
The report took shots at some sacred cows like capping home mortgage deductions and taxing employer-paid healthcare.
But, S-B had the gall to suggest pulling back some entitlements so Obama deep-sixed the report.
Maybe DJT should try to locate a copy.
Maybe it’s time to re-visit the Simpson-Bowles Report .
Here are some of the highlights …
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Below is the summary chart from the report.
Most of the buzz usually centers on the reduction of rates, elimination of the AMT, and capping of some deductions.
Let’s get specific.
Among other things, Simpson-Bowles proposes several tax code changes:
- Three brackets with a top tax rate of 28% with no AMT
- Capital gains & dividends get taxed at ordinary income tax rates … not 15%, not 20% … 28% at top rates
- Muni Bonds: Income on newly issued municipal bonds gets taxed … i.e. existing bonds are grandfathered as Fed tax-free.
- Employer paid health insurance premiums: Exclusion phased out by 2038 (2038?) via a complicated formula catering to unions … translation: employer paid health insurance premiums would eventually be taxed as ordinary income
- Deductions: Eliminate ALL itemized deductions … everybody takes the standard deduction … offset by some capped credits
- Mortgage deduction replaced by a 12% non-refundable tax credit … Mortgage capped at $500,000; No credit for interest from second residence and home equity loans
- Charitable giving: 12% non-refundable tax credit available above 2% of Adjusted Gross Income (AGI) floor … e.g. if you make $100,000, then no credit for the first $2,000 of charitable giving.
- No deduction or exclusion for State & Local Taxes … i.e. state income taxes, state sales taxes, local real estate taxes
Obviously, these changes hit different people in different ways.
You can browse the report for other deficit reduction recommendations.
Start planning …
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