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Bipartisan panel urges tax breaks, spending cuts
Report sounds alarm about trillions of dollars in federal deficit, debt
Question of the Day
A bipartisan task force on Wednesday called for Congress and President Obama to enact a Social Security payroll tax holiday and a “debt-reduction sales tax” as part of a sweeping plan aimed at getting the government’s financial house in order.
The independent report said a suspension of the Social Security payroll tax would pump $650 billion into pockets of individuals and businesses - giving them a reliable stream of income that would help boost consumer spending and confidence. By doing so, the commission and the Congressional Budget Office, the official legislative watchdog, estimate that the tax holiday also could create upwards of 7 million jobs over two years.
The tax holiday and the proposed 6.5 percent federal sales tax were part of a sweeping set of recommendations that the Bipartisan Policy Center, a think tank, released on Wednesday, which it says would rein in the $1.3 trillion deficit and the $13.6 trillion national debt.
“The American people and America faces a quiet killer that is eating away at the foundations of America,” said former Sen. Peter V. Domenici, the New Mexico Republican who co-chaired the task force with Alice Rivlin, a budget director under President Clinton. “That is the growing deficits and debt that comes with multiple years of deficits.”
The group also calls for multiyear freezes on domestic and military spending for a combined savings of $2.1 trillion through 2020 and to simplify the tax system. Under the plan, it would establish individual tax rates of 15 percent and 27 percent, reduce the corporate tax rate from 35 percent to 27 percent and replace the mortgage interest and charitable-contribution tax dollar deductions with 15 percent refundable credits.
Last week, Mr. Obama’s deficit-reduction commission floated a similar proposal that also included a series of painful moves, including reduced cost-of-living increases for Social Security recipients, Medicare cuts and ending or curbing popular tax breaks such as the home mortgage interest deduction.
That draft proposal, endorsed only by panel Chairmen Erskine Bowles and former GOP Sen. Alan Simpson, was criticized heavily by Republican and Democratic lawmakers and outside interest groups. The reception underscored the tough choices ahead for Mr. Obama and the enlarged Republican contingent on Capitol Hill as they work to curb federal spending.
Despite the political disagreements, Mr. Bowles sounded optimistic this week when he told reporters that one thing is clear: “The era of debt denial is over.”
On Wednesday, U.S. Chamber of Commerce Senior Vice President and Chief Economist Marty A. Regalia commended both of the proposals. The reports are a “powerful reminder of three things: the tremendous harm we are inflicting on our economy by failing to get the deficit under control; the unconscionable burden we are passing on to future generations; and that practical solutions can be found when public leaders work together on a bipartisan basis and with the long-term interests of the country in mind,” Mr. Regalia said.
Both of the debt-reduction proposals try to tackle the skyrocketing costs of Medicaid, Medicare, Social Security and military spending, but the Domenci-Rivlin plan establishes a national sales tax, something that Mrs. Rivlin knows will be a tough political sell.
“It will certainly be a controversial item, but it is a plausible way for the United States to go since we are the only major nation not to have a consumption tax,” she said.
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