So says the president:

The fourth step in our approach is to reduce spending in the tax code. In December, I agreed to extend the tax cuts for the wealthiest Americans because it was the only way I could prevent a tax hike on middle-class Americans. But we cannot afford $1 trillion worth of tax cuts for every millionaire and billionaire in our society. And I refuse to renew them again.
Beyond that, the tax code is also loaded up with spending on things like itemized deductions. And while I agree with the goals of many of these deductions, like homeownership or charitable giving, we cannot ignore the fact that they provide millionaires an average tax break of $75,000 while doing nothing for the typical middle-class family that doesn’t itemize.
My budget calls for limiting itemized deductions for the wealthiest 2% of Americans – a reform that would reduce the deficit by $320 billion over ten years. But to reduce the deficit, I believe we should go further. That’s why I’m calling on Congress to reform our individual tax code so that it is fair and simple – so that the amount of taxes you pay isn’t determined by what kind of accountant you can afford. I believe reform should protect the middle class, promote economic growth, and build on the Fiscal Commission’s model of reducing tax expenditures so that there is enough savings to both lower rates and lower the deficit. And as I called for in the State of the Union, we should reform our corporate tax code as well, to make our businesses and our economy more competitive.
This is my approach to reduce the deficit by $4 trillion over the next twelve years. It’s an approach that achieves about $2 trillion in spending cuts across the budget. It will lower our interest payments on the debt by $1 trillion. It calls for tax reform to cut about $1 trillion in spending from the tax code. And it achieves these goals while protecting the middle class, our commitment to seniors, and our investments in the future.

As we’ve seen, there is good reason to believe that middle-class tax cuts the president is describing are a drag on growth while the high-income rate reductions are a boon. The president might reject the CBO’s labor response model — there are other models — but he chose not to engage this question, so let’s move on.

So how will we yield $1 trillion in savings by reducing tax expenditures if our aim is to only reduce tax expenditures for the wealthiest 2% of Americans? The Center for a Responsible Federal Budget has a proposal to cap tax expenditures to 2 percent of adjusted gross income, a measure they report would reduce the 2011 fiscal deficit by an impressive $278 billion, blowing past the president’s goal of $1 trillion over ten years. This approach has another benefit:

The two percent cap would have the major advantage of simplifying taxpayers’ filing by inducing nearly 75 percent of all current itemizers to use the standard deduction. This would reduce the number of itemizers by more than 35 million taxpayers.

Of course, the CRFB proposal would impact large numbers of middle class households. An approach that only kicked in at income levels above $200,000 for individuals and $250,000 for couples would have a significant impact on the effective marginal tax rate.

As much I hate tax expenditures, I don’t have faith in an approach that introduces new work disincentives. But we’ll see. Perhaps he really will draw on the Bowles-Simpson approach. PPI’s modified Zero Plan, which we discussed yesterday, would be an improvement on the status quo, and it is designed to win the approval of progressives.