FACTBOX-US commission plan blueprint for fiscal debate?

Dec 3 (BestGrowthStock) – A controversial plan to ease the U.S.
deficit, advanced by President Barack Obama’s deficit
commission, failed to win the support it needs to advance to
Congress. [ID:nN03113533]

Eleven of the panel’s 18 members backed the
recommendations, three short of the 14 needed to force fast
congressional action. The deadline for a vote had been Dec. 1
but was extended to Friday, Dec. 3. The panel did not formally
vote on it but members expressed their views.

But the panel’s co-chairs, former Republican Senator Alan
Simpson and Clinton administration White House Chief of Staff
Erskine Bowles, still believe the blueprint for fiscal recovery
can influence lawmakers and the White House in upcoming debates
over taxation and spending.

Here are the main highlights:

THE PLAN CALLS FOR:

– Major tax code overhaul

– Eliminating many tax breaks to broaden the tax base and
help lower overall income tax rates.

– Cutting the U.S. budget deficits by nearly $4 trillion
over the next decade.

– Reducing the budget deficit to 2.3 percent of gross
domestic product (GDP) by 2015, from 8.9 percent in the last
fiscal year

– Capping revenue as a share of the economy to 21 percent
and cap spending under 22 percent, from the estimated 15.8
percent and 25.1 percent in 2011, respectively

– Stabilizing the growth in national debt by 2014 and
reduce the debt to 60 percent of GDP by 2023 and 40 percent by
2035, from the 68.9 percent forecast for 2011

ON TAXES, THE PLAN WOULD:

– Cut rates; broaden the tax base; simplify the tax code
and curb “tax expenditures,” which disguise spending via the
tax code; simplify and lower corporate taxes and cap revenue to
avoid excessive taxation.

– Cut income tax rates across the board and reduce the top
rate to between 23 and 29 percent.

– Replace the current number of income-tax brackets to
three from six.

– Simplify corporate taxes by replacing the multiple
brackets, which top out at 35 percent, with a single rate
between 23 percent and 29 percent.

– Tax all capital gains and dividends at ordinary income
rates. Another alternative would raise top rates on ordinary
income and exclude 20 percent of investment income from
taxation.

– Raise the federal gasoline tax (currently 18.4 cents per
gallon) by 15 cents per gallon to fund transportation spending

– Eliminate the Alternative Minimum Tax

– Limit the deduction for interest on home mortgages. The
proposal would provide a 12 percent nonrefundable tax credit,
but limit the deduction to primary residences and cap it at
$500,000.

– Interest on newly issued state and municipal bonds would
be subjected to income taxes.

– Maintain the earned-income tax credit and child tax
credit

– Eliminate itemized deductions so all individuals take
standard deductions

– Employer Provided Health Care Insurance: exclusion capped
at 75th percentile of premium levels in 2014, with cap frozen
in nominal terms through 2018 and phased out by 2038. Excise
tax reduced to 12 percent

– Charitable Giving: 12 percent nonrefundable tax credit
available to all taxpayers; available above 2 percent of
Adjusted Gross Income floor

– Retirement: Consolidate retirement accounts; cap
tax-preferred contributions to lower of $20,000 or 20 percent
of income, expand saver’s credit

ON DISCRETIONARY FEDERAL SPENDING:

– Cap both security and non-security spending to force
budget discipline on Congress. Cut low-priority programs

– Streamline government operation. Offer $50 billion in
immediate cuts and sketch out $200 billion in illustrative 2015
savings

– Make the federal government more efficient: cut the White
House and congressional budget by 15 percent; impose a
three-year pay freeze on members of Congress; impose a
three-year pay freeze on federal workers and Defense Department
civilians; cut the size of the federal workforce through
attrition; cut federal travel and vehicle budgets; sell excess
federal land

– Eliminate all congressional earmarks

– Cap discretionary spending through 2020: hold spending in
2012 to 2011 levels, return spending to pre-2008 levels by
2013, and limit future spending growth to half the projected
rate of inflation through 2020.

– Require equal percentage cuts from both security and
non-security spending

– Enforce spending caps in Congress via a “belt and
suspenders” approach to block the passage of any legislative
bill that exceeds the caps, and make the Senate wait until a
bill is scored by the nonpartisan Congressional Budget Office
before voting on it

– At the end of every congressional session, the CBO would
have to certify discretionary spending approved by Congress was
within limits, and if it was not, the White House Office of
Management and Budget would be required to take action

– Require the president to propose annual limits for war
spending

– Establish a disaster fund to budget for catastrophes

– Stop the abuse of emergency spending by making Congress
define emergency spending

ON SOCIAL SECURITY, THE PLAN WOULD:

– Gradually increase early and full retirement ages, based
on increases in life expectancy

– After the Normal Retirement Age reaches 67 in 2027 under
current law, index both the normal and Early Eligibility Age to
increases in life expectancy, effectively increasing the normal
retirement age to 68 by about 2050 and 69 by about 2075, and
the earlier retirement age to 63 and 64 in lock step

– Gradually increase the taxable maximum to cover 90
percent of wages by 2050

– Reduce poverty by providing an enhanced minimum benefit
for low-wage workers

– Enhance benefits for the very old and the long-time
disabled

– Give retirees more flexibility and create a hardship
exemption for those who cannot work beyond 62

ON HEALTH CARE COST CONTAINMENT:

– Reform physician payments, cost-sharing, malpractice law,
prescription drug costs and government-subsidized medical
education

ON MANDATORY SAVINGS:

– Cut agriculture subsidies. Modernize military and civil
service retirement systems. Reform student loan programs and
the Pension Benefit Guarantee Corporation.
(Reporting by Alister Bull, Donna Smith and Andy Sullivan in
Washington, editing by Philip Barbara)

FACTBOX-US commission plan blueprint for fiscal debate?