WSJ: White House Panel Seeks Simpler Tax Code

White House Panel Seeks Simpler Tax Code

With Eye on the Deficit, Advisers Weigh
Capping Big Deductions, Scrapping AMT

By JOHN D. MCKINNON
Staff Reporter of THE WALL STREET JOURNAL
August 31, 2005; Page A4

A White House advisory panel is considering scaling back some big tax breaks for individuals and families as it seeks a plan to simplify the tax code without deepening federal budget deficits.

For some Republicans, tax overhaul is a welcome change of topic from President Bush's stalled Social Security overhaul, but it's hardly a political panacea. The idea of capping major deductions and exclusions is sure to stir opposition from influential Republican supporters who benefit from the breaks.

After an August break, the panel will resume meeting next week and is expected to issue its recommendations by the end of September. Among breaks the commission is examining are those for employer-provided health insurance, state and local taxes, home-mortgage interest, 401(k) contributions and charitable contributions. Depending on what the White House and Congress do with the commission's recommendations, higher-income earners eventually could see some or all of those deductions diminish while other tax relief is added.

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Much of the relief, particularly for middle-income people, likely would come from ending the so-called alternative minimum tax. The AMT, designed in the 1960s to make sure wealthy people pay their fair share, is beginning to hit millions more middle-class taxpayers each year because it isn't indexed for inflation. Not only is the AMT raising their annual income-tax bills by hundreds or even thousands of dollars, but it is also requiring them to figure their tax liability twice, once under the regular tax and then under the AMT rules.

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But the commission's goal of eliminating the AMT -- a move that would cost the government $1.2 trillion in revenue over the next decade -- is forcing the panel to focus on ways to tighten some of the biggest deductions to keep the federal government's finances intact.

Tax-overhaul advocates are quick to note that some changes the panel is considering also would accomplish other worthy policy objectives. For example, some economists believe that capping the health-insurance break could curb inflation and encourage employers to give workers more compensation in the form of taxable cash and less in the form of tax-advantaged insurance. That has caught the Bush administration's attention, as it tries to find ways to increase lagging wage gains among lower-wage workers. Under current law, employers get a deduction for the health-insurance expenses they pay for employees, and employees also get to exclude the benefit from their compensation.

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Write to John D. McKinnon at john.mckinnon@wsj.com

URL for this article:
http://online.wsj.com/article/0,,SB112545064923127400,00.html

John Edwards was right: they want to shift all taxation from wealth to wages. Not only that, Grover and the boys want to starve the beast, so there's no money for any social programs.

What's to happen with the heaps of human debris is left open to conjecture. Perhaps poor people can earn a few cents by carrying the bodies to the rendering vats.

the Katrina disaster?

1/2 inch to 2 inches. Everyone under $120,000 would either not be effected or get a tax cut. Well, everyone I knew in the $30,000 bracket got a tax hike. He took a lot of the deductions the average person had out of the tax code. I was buying a house at the time and the new tax rules changed my mind.

I would bet * is going to do the same thing. Screw everyone but the rich.

and health insurance premimiums go up what - 10% a year? Pass the money on to the employee to pay taxes on? Whose tax is he overhauling? The average person or corporations. Corps pay too much money?