Not only are your taxes set to take the largest hike in American history in a little over two months, if rumors are true Obama’s deficit commission could recommend the removal of some popular tax breaks.
In February President Obama launched the Deficit Reduction Commission to come up with a plan to reduce the deficit and balance the budget. The 18-member panel is set to conclude its findings on December 1st. Rumors have it that some of the solutions to close the budget gap include reducing or removing deductions of mortgage interest, the child tax credit, and employees ability to use pre-tax dollars to pay part of their health insurance costs. From Wall Street Journal:
Sacrosanct tax breaks, including deductions on mortgage interest, remain on the table just weeks before the deficit commission issues recommendations on policies to pare back with the aim of balancing the budget by 2015.
The tax benefits are hugely popular with the public but they have drawn the panel’s focus, in part because the White House has said these and other breaks cost the government about $1 trillion a year.
At stake, in addition to the mortgage-interest deductions, are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter.
There is no doubt that any recommendation of tax hikes or the removal or reduction of tax breaks will meet stiff resistance in Congress. Unfortunately, when what encompasses the majority of the budget (Medicare, Medicaid, Social Security) is considered untouchable and a total overhaul of the tax code is unthinkable, there is little Obama’s deficit panel can do to make long term recommendations. Although an unlikely start should include the recall of all unused bailout funds, repeal of ObamaCare, and reduction of other welfare funding.