National Journal has the broad outline.
President Obama has been making favorable noises, which gives many conservatives, not least in the House, pause.
NRO’s Dan Foster is skeptical, as is Dan Mitchell. Home team Dan writes:
On the better side, the plan would reduce marginal tax rates and eliminate the AMT, promising a net $1.5 trillion tax reduction. But as Conn Carroll points out, the plan probably assumes a baseline in which the AMT is not patched every year and in which the Bush tax cuts expire. As a result, the plan would represent a substantial tax hike over current policy. It would also eliminate the CLASS Act, which was one of the stinkier tack-ons in Obamacare. But again, this isn’t all that significant either. The Democrats spent months trumpeting this long-term care program in the leadup to the passage of the ACA — not least because it helped the bill’s deficit reduction “score” — only to have the White House do a 180 and acknowledged that the program is deeply flawed.
I have to say, I think it is appropriate to use the CBO baseline. The 2001 tax cuts were passed through the reconciliation process because there wasn’t sufficient political support for “permanent” tax cuts of that size. Them’s the rules. I’d have much preferred a serious 2001 tax reform effort, e.g., a shift to a progressive consumption tax, but canny political strategists decided that the 2001 and 2003 tax cuts should expire. It is true that there is a strong political imperative to patch the AMT every year. But that is an affirmative political choice.
I am particularly pleased by the tax reform outline, which the Associated Press describes as follows:
The tax reform outline would set up three income tax rates — a bottom rate of 8-12 percent; a middle rate of 14-22 percent; and a top rate of 23-29 percent — to replace the current system that has a bottom rate of 10 percent, with five additional rates topping out at 35 percent.
It would reduce but not eliminate tax breaks on mortgage interest, higher-cost health plans, charitable deductions, retirement savings like individual retirement accounts and tax-free savings accounts known as 401(k)s, and tax credits for families with children.
Reducing the top rate is a huge win. So is paring back the tax breaks on mortgage interest and employer-sponsored medical insurance. My main concern is the treatment of capital income under this approach, i.e., are we “buying” lower marginal tax rates by imposing much higher taxes on capital gains, etc.?
We’re still a long way from a deal, and I worry that House Republicans might underestimate the importance of a low top marginal tax rate and eliminating tax expenditures that exacerbate cost growth in housing, medical care, education, and many other domains. A modest increase in revenue is, in my view, far, far less important than securing a lower top rate and a code with fewer distortions that put the basics of a middle class life further out of reach for a large number of Americans. It much better to compromise on this terrain than on, say, raising less new revenue and raising the top rate or preserving more tax breaks or both.