Retirement planning officials wasted little time in objecting to the $3.8 trillion deficit reduction draft report that was released Wednesday by the chairs of the bipartisan National Commission on Fiscal Responsibility and Reform.
The two chairmen of President Barack Obama’s Deficit Reduction Commission—Erskine Bowles, former chief of staff to Bill Clinton, and Alan Simpson, a former Republican Senator from Wyoming–proposed a plan that would cut Social Security and Medicare, reduce income tax rates, get rid of the mortgage-interest deduction, and abolish the Alternative Minimum Tax (AMT). The proposal must secure the votes of 14 of the 18-member, bipartisan deficit reduction committee. A final draft is due on Dec. 1.
Eric Kingson, co-chair of the Strengthen Social Security Campaign, calls the draft proposal “an equal opportunity disaster,” stating that it cuts benefits for today’s seniors and persons with disabilities. The draft proposal “cuts Social Security benefits for virtually every American alive today and yet to be born,” he said in a statement.
Commission leaders also want the Senate Finance and House Ways & Means Committees as well as Treasury to develop and enact comprehensive tax reform by the end of 2012. The report also proposes to reduce the deficit to 2.2% of GDP by 2015, exceeding Obama’s goal of 3% of GDP. Other areas that will be cut include defense spending, farm subsidies and healthcare costs, but the gas tax would be raised.
Measures in the proposal would not take effect until fiscal 2012, which David Kelly, chief market strategist for J.P. Morgan Asset Management, says that is “wise” as “the economy does not need a reduction in aggregate demand in the short run.” Overall, Kelly says, “there are a lot of great ideas in the proposal that if implemented would not only help strengthen our fiscal position but would also strengthen our economy and increase the value of financial assets.”
Bipartisan tax leaders–Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Sander Levin, D-Mich., along with Finance Ranking Member Chuck Grassley, R-Iowa, and Ways and Means Ranking Member Dave Camp, R-Mich.– told Doug Shulman, the commissioner of the Internal Revenue Service (IRS) in a Nov. 9 letter that they pledged to “do everything possible” to enact 2010 Alternative Minimum Tax (AMT) relief to ensure tax certainty for 21 million taxpayers.
The bipartisan tax policy leaders told Shulman that the IRS should “take all steps necessary to plan for changes” to present law so that no additional taxpayers faced higher taxes in 2010 because of the AMT. “As the leaders of the congressional tax-writing committees, we want to assure you that