Report: $2.4 Trillion in New Tax Hikes Coming

Apparently it’s not enough that Obama’s tax increases are heading down the rails like a freight train.

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It’s not enough that the Obama tax increases are heading down the rails like a freight train with a full head of steam. The so-called Bowles-Simpson Deficit Reduction Commission has a proposal for another $2.4 trillion coming in line once the elections are over.

At least that’s the conclusion of the folks over at Americans for Tax Reform, the anti-tax lobby founded by conservative activist Grover G. Norquist, who put out a release Monday saying this was the case.

“Sacrosanct tax breaks," including deductions on mortgage interest, the child tax credit, and deductions for employer-provided health insurance "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,” ATR said, pointing to media leaks out of the commission as the source for their information.

Assuming that’s correct, that the mortgage interest deduction and other popular tax breaks are on the table, the group says, “and assuming that these are the $1 in tax hikes for every $3 in spending cuts" promised by Bowles and supported by outgoing New Hampshire GOP Sen. Judd Gregg, what would be the tax implications on the American economy?

[See where Gregg gets his campaign money.]

Using the "tax expenditure" section of President Barack Obama’s budget, the five-year (FY 2011 to FY 2015) figures would be:

  • Mortgage interest deduction: $638 billion
  • Child tax credit: $60 billion (this is only the revenue loss, not the outlays)
  • Exclusion for employer-provided health insurance: $1.054 trillion (plus $613 billion in higher FICA taxes)
  • Altogether, says ATR, that’s a five-year tax hike in the range of $2.4 trillion, which it says is “a pretty good proxy for the 10-year CBO/JCT score, given the fact that the report says these will be curtailed, not eliminated.”

    As the group and other economists admit, trading those sacred cows in exchange for a fairer, flatter system with lower marginal rates as one part of the compromise might be a fair trade. It would certainly make good economic sense, as would be a system that taxed economic consumption instead of income in order to generate increased national savings and investment. But that’s not where things are headed--either inside the White House or over at the, let’s call it “economic equalization” rather than “deficit-reduction” commission, which seems to think its mandate is to find ways to make to make total spending and total revenue figured match--no matter what the consequences to the U.S. economy or the American family checkbook.

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