WASHINGTON—The co-chairs of a deficit commission established by the White House would seek to limit federal spending on health care, gradually raise the retirement age and lower the corporate tax rate to 26%, according to a draft set of proposals released Wednesday. The sweeping plan is likely to provoke a political firestorm. It touches many of the third rails of politics, including defense... [more]
WASHINGTON—The co-chairs of a deficit commission established by the White House would seek to limit federal spending on health care, gradually raise the retirement age and lower the corporate tax rate to 26%, according to a draft set of proposals released Wednesday.
The sweeping plan is likely to provoke a political firestorm. It touches many of the third rails of politics, including defense spending, Social Security and middle-class tax breaks long seen as inviolate.
It isn't a final document. The co-chairs—Erskine Bowles, a chief of staff in the Clinton White House, and former Republican Sen. Alan Simpson of Wyoming—presented the draft plan to members of the 18-strong committee earlier Wednesday. It was presented as a series of options that could be taken together or considered individually as a ways to bring down federal spending.
Members of the panel emerged from the meeting saying they thought the proposals were "provocative," but they failed to endorse them outright.
According to the draft, the plan identifies $200 billion in discretionary-spending cuts by 2015, with half the savings from reductions to spending by the Pentagon. It would place limits on tax breaks for homeowners by removing deductions of interest on second homes, home-equity loans and mortgages worth more than $500,000.
For businesses, it would lower the corporate tax rate but remove a number of deductions currently available. It would make permanent the research-and-development tax credit.
The federal gasoline-tax rate would start to increase from 2013, increasing by 15 cents a gallon at that stage.
Federal subsidies to agribusinesses would begin to be slashed by $3 billion a year.
On Social Security, it would gradually increase the retirement age when people can start receiving benefits to 68 at around 2050 and to 69 by 2075.
It would combine a cut in benefits with an increase in taxes levied on wealthier seniors' benefits.
The savings would be phased in over time and include a freeze on salaries and bonuses paid to federal employees for three years, at a savings of $15.1 billion by 2015.
It would propose cutting the federal work force by 10% for a further savings of $13.2 billion by 2015.
It would seek to rein in federal spending on health care, both by introducing further proposed changes, including reform of tort law, and by seeking to slow the growth of the Medicare program.
The panel co-chairs proposed establishing a committee to identify further budgetary cuts going forward.
"This is really a starting point, and it's an honest starting point," Sen. Richard Durbin (D., Ill.) told reporters during a break in panel deliberations.
"I told them that there are things in there that inspire me, and there are things in there that I hate like the devil hates holy water. I'm not going to vote for this thing," Durbin said.
Mr. Durbin is one of 18 members of the deficit-reduction commission that is to make recommendations by Dec. 1.
Panel members were expected to continue meeting Wednesday and hold meetings next week aimed at narrowing differences.
Another member of the panel, Rep. Jan Schakowsky (D., Ill.), said she is encouraged that a proposal was put on the table that would restore Social Security to long-term solvency. At the same time, she said it was "not a proposal that I could support right now."
"This is a serious and impressive effort," said Rep. Paul Ryan (R., Wis.). "It's a good start.
The panel would need 14 of 18 members to agree on a plan for it to receive an automatic vote from Congress.
The panel was established by the president to discuss longer-term overhauls to federal spending that are seen by economists as necessary to bring the federal debt back to managable levels.
The panel was told to come up with a proposal that would bring the federal budget deficit back to about 3% of U.S. gross domestic product by 2015, compared with 8.9% in fiscal 2010, which ended on Sept. 30.
Write to Corey Boles at corey.boles@dowjones.com and Martin Vaughan at martin.vaughan@dowjones.com
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Response by marco_m
about 15 years ago
Posts: 2481
Member since: Dec 2008
works for me
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Response by marco_m
about 15 years ago
Posts: 2481
Member since: Dec 2008
real question is, if ur coop has a 600k mortgage, would you then lose ur maintenance deduction??? hmmmm...
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Response by LICComment
about 15 years ago
Posts: 3610
Member since: Dec 2007
This sounds like a fiscally responsible good start. That two Democrats quoted are against it is notable.
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Response by printer
about 15 years ago
Posts: 1219
Member since: Jan 2008
the plan is a nice start. i love the general idea of lower rates while eliminating deductions. the general plan for SS is in line with what is widely considered to be necessary to preserve solvency. I'd prefer to see some more creativity in terms of reducing the size of the fed'l gov't - eliminating a cabinet-level department or two, for starters.
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Response by dwell
about 15 years ago
Posts: 2341
Member since: Jul 2008
And the effect on NYC RE will be......................
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Response by NYC10013
about 15 years ago
Posts: 464
Member since: Jan 2007
If the cap actually goes in place then prices come down another 10-15%, potentially more in the $750K-$1.5mm price range
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Response by dwell
about 15 years ago
Posts: 2341
Member since: Jul 2008
Yes, 10013.
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Response by uptowngal
about 15 years ago
Posts: 631
Member since: Sep 2006
This would have a greater effect on more expensive RE markets. A place worth $500k would house one or two people in Manhattan vs. a family in the Midwest.
And to marco_m's comment above, also wonder about underlying mortgages for coops.
This would place an even greater tax burden on the middle class in the NYC area. Though I understand the fiscal responsibility of it all, as the US is one of the few countries that subsidizes housing this way.
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Response by ekartash
about 15 years ago
Posts: 364
Member since: Jun 2007
is the 500k for the first 500k of mortgage, or does it eliminate any deductions for mortgages about 500k. so if i have a 700k mortgage, can i write off the first 500k, and not get the break on the remaining 200k, or am i not getting a deduction on the whole thing?
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Response by printer
about 15 years ago
Posts: 1219
Member since: Jan 2008
1st off, this is the 1st cut proposal for a plan which in itself is a proposal for a general framework of something which may or may not ever get passed in pieces or in the whole, so parsing it for specifics is a bit pointless. That said, it would be the 1st 500k - doesn't matter how large the mortgage itself is, just like now with the $1mm limit.
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Response by stevejhx
about 15 years ago
Posts: 12656
Member since: Feb 2008
LICC - what are you going to do without your mortgage interest deduction?
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Response by truthskr10
about 15 years ago
Posts: 4088
Member since: Jul 2009
"is the 500k for the first 500k of mortgage, or does it eliminate any deductions for mortgages about 500k. so if i have a 700k mortgage, can i write off the first 500k, and not get the break on the remaining 200k, or am i not getting a deduction on the whole thing?"
I'd expect the same way it works with income taxes, as already pointed out, the first 500 treated like everyone elses.
Excellent point/question by Marco. Of course if you pay all cash for a place, then your maint deduction is quite safe. THis may make some of those extreme high maint, low sales coops look less ugly.
Whether your a bear or bull,you'd have to agree this would be a bad thing overall for NYC real estate.
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Response by front_porch
about 15 years ago
Posts: 5315
Member since: Mar 2008
ek, the former -- you could still write off the first $500K.
but as printer points out, this a brainstorm draft, not yet reality.
ali r.
DG Neary Realty
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Response by stevejhx
about 15 years ago
Posts: 12656
Member since: Feb 2008
Of course LICC is partisan in his choice of criticisms:
Some Republicans also expressed skepticism that the report would survive in its current form. New Hampshire Senator Judd Gregg called the plan a “starting point.” Representative Jeb Hensarling of Texas said “some of it I like, some of it disturbs me.”
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Response by Riversider
about 15 years ago
Posts: 13572
Member since: Apr 2009
Will never happen. The real estate lobby will kill it.
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Response by truthskr10
about 15 years ago
Posts: 4088
Member since: Jul 2009
"Will never happen. The real estate lobby will kill it."
You would think but how about states that are on the lower cost of living threshold? Wouldn't those states see this as a venue to increase population (and demand) for their real estate?
{Granted Kentucky is not going to gain New Yorkers but you get the idea)
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Response by Wbottom
about 15 years ago
Posts: 2142
Member since: May 2010
the subsidy that is the mortgage interest deduction should end as should most if not all subsidies
this one is most unfair to the poor and anyone else who rents
most subsidies benefit those powerful enough to influence politicians
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Response by ekartash
about 15 years ago
Posts: 364
Member since: Jun 2007
"this one is most unfair to the poor and anyone else who rents"
you are not forced to rent.
and why would this matter too much for nyc real estate? am i wrong, or do most people who buy here, live here.
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Response by w67thstreet
about 15 years ago
Posts: 9003
Member since: Dec 2008
oh there you are erkie... NO worries NYC RE ONLY goes UP. What do you care about the mortgage deductions when NYC RE increases 20%/yr.... don't look a gift horse in the mouth.
OH who's been saying that the mortgage tax deduction and just the whole mania of supporting housing will be re-jiggered in the next few years? WHO who who? IT'S ME, It's me who called $500psf, it's me who said short/foreclosure in nyc were coming, it's me who fking called this a double dip... it's me who is predicting lemmings in 2009/2010 would regret their "once in a lifetime buys." FLMAOZ
enjoyz suckers.
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Response by Wbottom
about 15 years ago
Posts: 2142
Member since: May 2010
who said i am forced to rent?
who said the government should be forced to incent people to buy?
and wtf does the issue of whether or not people buy and live here have to do with this?
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Response by truthskr10
about 15 years ago
Posts: 4088
Member since: Jul 2009
"and why would this matter too much for nyc real estate?"
Cost of living here is double.
Someone with a a 750K mortgage on a NY home is like someone with a 375K mortgage in Massachusetts. But here the NY'er will get socked even more.
Make no mistake, this would seriously affect NY and California real estate.
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Response by 875gator
about 15 years ago
Posts: 193
Member since: Sep 2010
This would nudge people into not taking out such large mortgages in the first place. I like the idea.
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Response by ekartash
about 15 years ago
Posts: 364
Member since: Jun 2007
Wbottom. If its your primary home, you still get the full deduction. Atleast according to this non existent plan.
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works for me
real question is, if ur coop has a 600k mortgage, would you then lose ur maintenance deduction??? hmmmm...
This sounds like a fiscally responsible good start. That two Democrats quoted are against it is notable.
the plan is a nice start. i love the general idea of lower rates while eliminating deductions. the general plan for SS is in line with what is widely considered to be necessary to preserve solvency. I'd prefer to see some more creativity in terms of reducing the size of the fed'l gov't - eliminating a cabinet-level department or two, for starters.
And the effect on NYC RE will be......................
If the cap actually goes in place then prices come down another 10-15%, potentially more in the $750K-$1.5mm price range
Yes, 10013.
This would have a greater effect on more expensive RE markets. A place worth $500k would house one or two people in Manhattan vs. a family in the Midwest.
And to marco_m's comment above, also wonder about underlying mortgages for coops.
This would place an even greater tax burden on the middle class in the NYC area. Though I understand the fiscal responsibility of it all, as the US is one of the few countries that subsidizes housing this way.
is the 500k for the first 500k of mortgage, or does it eliminate any deductions for mortgages about 500k. so if i have a 700k mortgage, can i write off the first 500k, and not get the break on the remaining 200k, or am i not getting a deduction on the whole thing?
1st off, this is the 1st cut proposal for a plan which in itself is a proposal for a general framework of something which may or may not ever get passed in pieces or in the whole, so parsing it for specifics is a bit pointless. That said, it would be the 1st 500k - doesn't matter how large the mortgage itself is, just like now with the $1mm limit.
LICC - what are you going to do without your mortgage interest deduction?
"is the 500k for the first 500k of mortgage, or does it eliminate any deductions for mortgages about 500k. so if i have a 700k mortgage, can i write off the first 500k, and not get the break on the remaining 200k, or am i not getting a deduction on the whole thing?"
I'd expect the same way it works with income taxes, as already pointed out, the first 500 treated like everyone elses.
Excellent point/question by Marco. Of course if you pay all cash for a place, then your maint deduction is quite safe. THis may make some of those extreme high maint, low sales coops look less ugly.
Whether your a bear or bull,you'd have to agree this would be a bad thing overall for NYC real estate.
ek, the former -- you could still write off the first $500K.
but as printer points out, this a brainstorm draft, not yet reality.
ali r.
DG Neary Realty
Of course LICC is partisan in his choice of criticisms:
Some Republicans also expressed skepticism that the report would survive in its current form. New Hampshire Senator Judd Gregg called the plan a “starting point.” Representative Jeb Hensarling of Texas said “some of it I like, some of it disturbs me.”
Will never happen. The real estate lobby will kill it.
"Will never happen. The real estate lobby will kill it."
You would think but how about states that are on the lower cost of living threshold? Wouldn't those states see this as a venue to increase population (and demand) for their real estate?
{Granted Kentucky is not going to gain New Yorkers but you get the idea)
the subsidy that is the mortgage interest deduction should end as should most if not all subsidies
this one is most unfair to the poor and anyone else who rents
most subsidies benefit those powerful enough to influence politicians
"this one is most unfair to the poor and anyone else who rents"
you are not forced to rent.
and why would this matter too much for nyc real estate? am i wrong, or do most people who buy here, live here.
oh there you are erkie... NO worries NYC RE ONLY goes UP. What do you care about the mortgage deductions when NYC RE increases 20%/yr.... don't look a gift horse in the mouth.
OH who's been saying that the mortgage tax deduction and just the whole mania of supporting housing will be re-jiggered in the next few years? WHO who who? IT'S ME, It's me who called $500psf, it's me who said short/foreclosure in nyc were coming, it's me who fking called this a double dip... it's me who is predicting lemmings in 2009/2010 would regret their "once in a lifetime buys." FLMAOZ
enjoyz suckers.
who said i am forced to rent?
who said the government should be forced to incent people to buy?
and wtf does the issue of whether or not people buy and live here have to do with this?
"and why would this matter too much for nyc real estate?"
Cost of living here is double.
Someone with a a 750K mortgage on a NY home is like someone with a 375K mortgage in Massachusetts. But here the NY'er will get socked even more.
Make no mistake, this would seriously affect NY and California real estate.
This would nudge people into not taking out such large mortgages in the first place. I like the idea.
Wbottom. If its your primary home, you still get the full deduction. Atleast according to this non existent plan.
W67. Keep posting the open house numbers
Nevermind. I read it wrong