Thoughts on the Simpson-Bowles Deficit Commission report
Many of the tax reforms are excellent. Simplifying the tax code, while reducing overall income tax rates makes sense. Lowering income-tax rates would not only be good in terms of stimulus, it would be good for the American economy years into the future. Meanwhile, wiping out all the pernicious deductions and loopholes would make the tax system more fair and efficient, and would make up for lost revenue from lower rates. The mortgage-rate tax deduction would go, creating a level playing field for home-owners and renters. For those of us who mourned the short life and death of Wyden/Bennett, the removal of the employer tax exemption for health insurance is most welcome.
This seems pertinent:
Bill Buckley and I used to share a complaint about the tax code, and this is the way we would put it, when complaining together: The tax code pits Americans against one another. It pits homeowners against renters, married people against unmarried people, people with children against people without children, people with children going to college against people with children going into trades — and on and on. The tax code is packed with social policy, and bias. That’s one reason I say, a pox on it.
There is much more, but I thought I’d focus on the tax side rather than the cuts which I haven’t studied as closely yet. I do know they want to tackle defense spending. Thoughts?
Property values are so low as to put many people underwater on their mortgage, and net equity is one of the best measures of the rate of default. Yet you want to drive property values sharply down even further? Eliminating the homeowner deduction is, at minimum, a 20 year project.
I would sign on to the elimination of that deduction, if we wait until property values are back in line with mortgage debt and the deduction is reduced no more than 5 percentage points per year for 20 years. But the cost of my acquiescence is a tax on carbon emissions.
I agree – a phase-out over a number of years is the only way to handle ridding ourselves of the mortgage tax deduction. I’m less sure how removing one deduction is a fair trade for a new tax hike on carbon. That strikes me rather as piling on – you lose money on your mortgage tax deduction and on carbon emissions. I’d say maybe replace part of the payroll tax with a tax on carbon emissions. That sounds more reasonable.