Office of Management and Budget Director Peter R. Orszag in a May 9 OMB blog has reiterated the Obama Administration's plans to cap the rate at which taxpayers earning over $250,000 can use itemized deductions to reduce their income tax liability at 28 percent.
Full Text:
Saturday, May 9th, 2009 at 9:30 am
The Health Care Reserve Fund: A Historic Commitment to Reform
Peter R. Orszag, Director
As I have said more than a few times before (even on this blog)
reducing health care costs is the key to the country’s fiscal future
and also to providing relief to American families from rising health
care bills. To that end, the Administration is committed to reforming
health care this year and to doing so in a deficit-neutral manner.
We began that process in February in the budget overview, which
included a $634 billion health care reserve fund -- a substantial down
payment toward health care reform. On Monday, when we release the
Summary Tables and Analytical Perspectives of the Budget, you will see
that the full Budget does exactly the same thing and includes $635
billion in a health care reserve fund.
As in the February overview, about half of the health care reserve fund
in the full Budget comes from savings in Medicare and Medicaid that
would improve the health care system’s efficiency and quality. There
is a change (the "$635 billion" in the above paragraph is not a typo).
In the time since we released the February overview, the health care
reforms in the reserve fund have been re-estimated to save about $7
billion less over the next 10 years, while the limitation on itemized
deductions has been re-estimated to save about $51 billion less over
this period. We closed this gap by dedicating some other tax
enforcement measures and loophole closers totaling $60 billion. This
then brings the reserve fund in the full Budget to almost exactly the
same total as before.
How do we do it?
First, we improve tax compliance and eliminate unjustified tax breaks
for narrow interest groups. For instance, the Budget proposes to:
- Expand information reporting that will help the IRS catch
tax cheats. The expanded information reporting is expected to raise
more than $10 billion over the next 10 years, by allowing the IRS to
better enforce existing tax law.
- Target valuation games
played by those facing estate and gift taxes that allow them to
undervalue transferred property, raising another $24 billion over the
next 10 years.
- Immediately clamp down on a tax loophole
that is giving an unintended, multibillion dollar windfall to paper
companies, saving more than $1 billion this year and next.
Second, as in the February overview, the Budget would also limit
the tax rate at which families making more than $250,000 can take
itemized deductions to a maximum of 28 percent. This is a matter of fairness. If
you’re a teacher making $50,000 a year and decide to donate $1,000 to
the Red Cross or United Way, you enjoy a tax break of $150. If you are
Warren Buffet or Bill Gates and make that same donation, you currently
get a $350 deduction—more than twice the break as the teacher. Limiting
itemized deductions for high-income Americans would help restore
balance to the tax code, and any effect on charitable giving is likely
to be swamped by other Administration policies. The best way to boost
charitable giving is to jumpstart the economy and raise incomes—and the
purpose of the Recovery Act enacted in the Administration’s first month
in office was to do precisely that. The limitation on itemized
deductions is now expected to raise about $267 billion over the next 10
years, which we will devote entirely to health care reform. All
together, these policies would raise a total of $635 billion to be
devoted to health care reform—almost exactly the same total amount as
in the February overview.
It is true—more savings than this will be needed to pay for
comprehensive health care reform in its entirety. But I believe that
the reserve fund, in itself, represents a historic commitment, and I
look forward to working with Congress to bring about—and pay
for—fundamental health care reform this year.
Source: http://www.whitehouse.gov/omb/blog/09/05/09/TheHealthCareReserveFundAHistoricCommitmenttoReform/
