about Obama's position on the rest. A little early to call FDL's criticism "fear-mongering". What the report advocates is a mixed-bag of grab-backs from traditional middle class tax breaks. We don't know yet what other parts of this Obama may endorse. Here's more on the specifics we do not yet know:
http://www.govexec.com/dailyfed/1210/120110nj1.htmStill, the basic concept of the plan's attack on the deficit remains the same. It begins with a modest increase in the overall tax burden, softened by a broad tax reform that knocks out most tax breaks and reduces tax rates at every level. It then calls for an increase in the retirement age for Social Security -- which would save tens of billions of dollars over the next decade alone -- and more changes aimed at slowing the growth in health care costs.
The commission goes further than the president's stated goal of reducing the deficit to 3 percent of gross domestic product, instead whittling it down to 2.3 percent of GDP by 2015. It caps revenue and spending, meanwhile, at 21 percent of GDP each.
The plan recommends the immediate implementation of fundamental tax reform and the elimination of nearly all of the 150-plus tax expenditures, with a few exceptions: the earned income tax credit, the child credit, mortgage interest deductions (but only for primary homes), employer-provided health insurance credits, retirement savings and pensions credits, and charitable giving deductions. Itemized deductions would be eliminated, and capital gains and dividends would be taxed at ordinary rates.
The plan cuts tax rates across the board, reducing the top rate to between 23 percent and 29 percent. Originally, the co-chairs recommended establishing three rates -- 15 percent, 25 percent, and 35 percent. Their proposal to implement a 15 cent-per-gallon fuel tax hike within the next five years remains unchanged.
The corporate tax rate would be streamlined, with the rate necessarily falling between 23 percent and 29 percent, down from the current top rate of 35 percent. The plan suggests a 28 percent rate in its illustrative proposal, a 2-point increase over the chairmen's mark proposal. Meanwhile, a territorial system would be established for foreign-owned companies with U.S. subsidiaries, allowing them to keep foreign profits. All tax deductions and expenditures for businesses would be eliminated.
The plan calls for discretionary spending to return to pre-crisis 2008 levels in 2013, while freezing spending in 2012 at 2011 levels and constraining spending growth to half the rate of inflation through 2020. It would cut non-war defense spending at the same rate as non-defense spending, while war spending would fall under the responsibility of the president, who would be required to propose annual limits.
The plan adds details on how to reduce federal health care spending, which were noticeably absent in the initial Simpson-Bowles proposal. They include changing how Medicare pays doctors, scrapping a long-term care insurance plan created by President Obama's signature health care bill, overhauling medical malpractice litigation, and chipping away at Medicare and Medicaid costs through a variety of measures.
But the final proposal still lacks specifics on how to control upward-spiraling health care cost increases throughout the economy - the biggest driver of long-term budget deficits, according to the Congressional Budget Office.
The commission's boldest attempt to control those costs is by eliminating the tax exemption for employer-paid health benefits, which many economists say would help reduce costs by forcing individuals to shoulder more of the burden of their health-care choices.
The retirement age would be raised to 69 from 65 in order to rein in Social Security spending to ensure the program's solvency.
More generally, the plan proposes budget process reforms to encourage accountability in the budgeting process.