The new Gang of Six proposal brewing in the Senate is a total sellout which promises to usher in a vast new round of new taxes. Not just closing of loopholes, but real live taxes we will all have to pay.
The proposal is based on the recommendations of the Bowles-Simpson Deficit Reduction Commission as modified by the “Gang of Six” US Senators. It plans to raise $1 trillion in new tax revenues. While the gang is vague on the details of the new taxes, the Bowles-Simpson Commission was quite clear – it proposes the virtual elimination of all tax deductions, certainly for taxpayers with joint incomes of over $200,000 and possibly for everyone. The revenues it would generate from eliminating or sharply curtailing the mortgage interest, charitable, and state and local tax deductions are set to generate $1 trillion of new revenues over ten years and to finance a vague and unspecified hoped for cut in the top tax bracket.
The elimination or significant curtailment of these deductions would have a ruinous economic impact.
Cutting out the mortgage interest deduction would cost American taxpayers almost $100 billion a year. It would decimate the already moribund real estate sector and would make their current homes unaffordable for millions of homeowners by changing the financial rules in the middle of the game.
Restricting or eliminating the state and local tax deduction is, in effect, to levy a 25-35 percent surcharge on state and local taxes – income and property – hammering people who live in high tax states. The cost in jobs and state revenues are likely to be staggering.
Limiting the charitable donation deduction is the unkindest cut of all since it hurts precisely the poor people Obama and the Democrats say they most want to help. They apparently only favor help to the poor when it comes through the government and buys their votes.
But the most dangerous part of the proposal is that to establish a commission to monitor the deficit reduction measures to assure that they unfold as planned. Senator Kent Conrad (D-ND), Chairman of the Senate Budget Committee, has been pushing this idea for more than a year now hoping to equip the commission with automatic authority to cut spending and to raise taxes without legislative authorization. It would allow a tax increase without requiring any member of Congress to vote for it.
The House has taken a bold and important step in passing the “Cut, Cap and Balance” plan to deal with the deficit. By cutting spending, capping it as a proportion of GDP, and passing a balanced budget amendment to the Constitution, the House Republicans have put the perfect plan on the table. They should not blink in the face of the Senate proposal but should stand up and demand that their leadership not be gulled into signing on to any variation of the Gang of Six plan.
One hopes that the Republican voters in the states the Republican accomplices of Conrad represent remember their decision to cast their lots with the Democratic members of the Gang to derail the House proposal and to add momentum to this monstrous deal. They are: Senator Mike Crapo of Idaho, Senator Tom Coburn of Oklahoma, Senator Saxby Chambliss of Georgia, and Senator Lamar Alexander of Tennessee. They all deserve a primary when they run again.