Gang of Six and Your Taxes
Would the tax proposals that are part of the Gang of Six’ solution for the debt crisis be good or bad for you and for your business? Who knows? There are too many problems with these proposals to make an educated guess.
The numbers don’t add up
The highlights of the proposal say that taxes would be “fundamentally reformed,” resulting in tax relief of a net $1.5 trillion over 10 years. However, some particulars show that at the same time, taxes would rise by $1 trillion over the same period. And simultaneously, the alternative minimum tax would be eliminated at a cost over 10 years of $1.7 million. I studied calculus, but I don’t know of any equation that makes sense of these numbers.
The House Budget Committee’s initial take on the proposal shows a $2 trillion tax increase. Where those increases would come from is unknown at this time. The old refrain about “closing loopholes” always sounds good until special interest groups have their say.
Details are unknown
Precise tax rules are nowhere in the picture yet. The top tax rate for individuals and corporations supposedly would decline to between 23% and 29%. There would be two other tax rates of 8% to 12% and 14% to 22%. Those rates become possible only by eliminating many tax-favored deductions and credits.
So, what deductions, credits, and other tax-favored rules will be cut back or ended entirely? Will the itemized deductions for individuals for home mortgage interest and charitable contributions disappear? Will the exclusion for employer-paid health coverage be axed? Will businesses still enjoy incentives for R&D?
The Gang of Six (Senate Minority Leader Dick Durbin, D-Ill., Senate Budget Committee Chairman Kent Conrad, D-N.D., and Sens. Mark Warner, D-Va., Mike Crapo, R-Idaho, Saxby Chambliss, R-Ga., and Tom Coburn, R-Okla.) put an interesting bi-partisan plan on the table. Whether and to what extent the tax portions of the plan ultimately are adopted remains to be seen … and there’s a long, long way to go.