The White House released on November 29 a report that strengthens its position that capping popular tax deductions will be insufficient to raise needed revenues to reduce the deficit without also raising taxes on middle-income Americans.
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Treasury Secretary Timothy Geithner introduced a proposal from President Obama that calls for raising almost $1.6 trillion over the next decade, about $1 trillion of which would be raised by letting the current tax cuts expire.
The rest would be raised by limiting tax deductions for those making over $250,000 per year.
But Republicans have not committed to such a high revenue number and are against making any tax hikes.
Both Democrats and Republicans are targeting about $4 trillion in deficit reductions over the next ten years.
A $25,000 cap on deductions like mortgage interest would raise between $450 billion and $800 billion and has appeal to members of both parties, including Mitt Romney.
The deduction cap would raise $800 billion if it applies only to those making annual salaries of greater than $250,000.
An additional $650 billion would be raised if the cap were phased in gradually based on income levels, which would also keep the wealthy from being suddenly hit by a large tax bill.
Deduction caps being discussed include mortgage interest, health insurance, charitable donations, and state and local taxes.
Charitable deductions are likely to escape the chopping block just as they did in the 1986 tax reform, due to the lobbying power of universities, foundations, and charities that are already moving to protect any deduction that is vital to their fund-raising efforts.
continues to be at a stalemate as House Republicans say Democrats are short on providing details on spending cuts.
The proposal Geithner introduced includes $400 billion in unspecified spending cuts and calls for a permanent increase in the budget ceiling, which would not require Congressional approval to tap.