Presidential commission unveils overhaul of tax code

Author: Anchor Scott Jagow, Reporter John Dimsdale

Published: October 19, 2005

SCOTT JAGOW, anchor: 1040s and a riddle.

Announcer: The MARKETPLACE MORNING REPORT is produced in association with the University of Southern California.

JAGOW: From American Public Media in Los Angeles, I'm Scott Jagow.

I know it's early, but I have a tax question for you. I'll make it really easy. Would you choose a very simple tax-filing process if it meant you had to give up those beloved deductions?--sort of a time-is-money debate. Takes a long time to fill out the forms and do all those equations, but you get the breaks. Yesterday a presidential commission unveiled a dramatic overhaul of the tax code. It would make life a lot easier, but you wouldn't get those kickbacks. Here's John Dimsdale.

JOHN DIMSDALE reporting: To keep things simple, the president's tax reform panel wants to limit or eliminate a lot of the tax write-offs that Americans have long taken advantage of, like the deductions for mortgage interest or employer-provided health and life insurance benefits. Now the reformers are set to recommend getting rid of the federal break for state and local taxes. Len Burman of the Tax Policy Center says the deduction for local taxes makes higher state taxes more palatable. Dropping it would pressure states to cut their taxes.

Mr. LEN BURMAN (Tax Policy Center): There's a concern among some state-tax experts there'd be a race to the bottom; that states would compete to have the lowest taxes and the lowest amount of services as well.

DIMSDALE: Getting rid of the deduction would generate enough revenue to scrap the alternative minimum tax. The AMT was designed to make sure wealthy taxpayers paid their fair share, but it's not indexed to inflation, and it's snagging more middle-class taxpayers. In Washington, I'm John Dimsdale for MARKETPLACE.