Daily Tax Update - February 19, 2013: Simpson-Bowles Release Second Deficit Reduction Plan

SIMPSON-BOWLES RELEASE SECOND DEFICIT REDUCTION PLAN:  Today, the Fiscal Commission and Moment of Truth Project Co-Chairs Erskine Bowles and Alan Simpson on released a new comprehensive deficit reduction proposal (“A Bipartisan Path Forward to Securing America's Future”). Their plan includes approximately $600 billion in "pro-growth" tax reform.  The report outlines four steps to achieve deficit reduction through 2023. 

  • The report states, “In our view, a comprehensive deficit reduction plan should bring the debt below 70% of GDP by early next decade and keep it on a downward trajectory thereafter.”  The report continues, “The first two steps of deficit reduction have been accomplished through various continuing resolutions, the Budget Control Act of 2011, and the recent American Taxpayer Relief Act. We propose two more steps – a “Step 3” focused on entitlement reforms, tax reform, and additional spending cuts and “Step 4” focused on securing our long-term debt trajectory. This proposal builds upon the discussions between President Obama and Speaker Boehner with additional deficit reduction necessary to put the debt on a declining path as a share of the economy.  In “Step 3,” we call for an additional $2.4 trillion of deficit reduction over the next ten years. Roughly one quarter of those savings should come from health care reforms and another quarter from tax reform. The remaining savings should come from a combination of mandatory spending cuts, stronger discretionary caps, cross-cutting changes such as adopting the chained CPI for indexing provision in the federal budget, and lower interest payments. In “Step 4”, we call for a parallel process to make Social Security sustainably solvent and make further reforms in health care if necessary to limit cost growth to about the rate of the economy.”
  • On the issue of tax reform, the report states, “The current tax code is complicated, confusing, costly, anti-growth, anti-competitive, unfair, and riddled with well over $1 trillion of tax expenditures– which really are just spending by another name. Tax reform must reduce the size and number of tax expenditures to reduce the budget deficit and lower marginal tax rates for individuals and corporations. At the same time, tax reforms must maintain or improve the progressivity in the tax code and promote economic growth.  Tax reform will make the tax code more efficient, effective and globally competitive.”
  • Click to access: A BIPARTISAN PATH FORWARD TO SECURING AMERICA'S FUTURE
  • In remarks today, President Obama said, “I’m willing to save hundreds of billions of dollars by enacting comprehensive tax reform that gets rid of tax loopholes and deductions for the well off and well connected, without raising tax rates. I believe such a balanced approach that combines tax reform with some additional spending reforms, done in a smart, thoughtful way is the best way to finish the job of deficit reduction and avoid these cuts once and for all that could hurt our economy, slow our recovery, put people out of work.  And most Americans agree with me.”  Obama continued, “The House and the Senate are working on budgets that I hope reflect this approach.  But if they can’t get such a budget agreement done by next Friday -- the day these harmful cuts begin to take effect -- then at minimum, Congress should pass a smaller package of spending cuts and tax reforms that would prevent these harmful cuts -- not to kick the can down the road, but to give them time to work together on a plan that finishes the job of deficit reduction in a sensible way.”

RENACCI NAMED TO WAYS AND MEANS COMMITTEE:  Ways and Means Chairman Dave Camp announced that Rep. Jim Renacci (R-OH) will fill the vacancy of Senator Tim Scott (R-SC).  Scott, who was named to the Ways and Means Committee in November of 2012, was appointed to the U.S. Senate in December 2012.

MISCELLANEOUS GUIDANCE RELEASED:

Revenue Ruling 2013-7 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274. The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:  As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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