spending starting in 2012, and an overhaul of the tax code to raise revenue. Those changes and others would erase nearly $4 trillion from projected deficits through 2020, the proposal says.
The plan would reduce Social Security benefits to most future retirees -- low-income people would get a higher benefit -- and it would subject higher levels of income to payroll taxes to ensure Social Security's solvency for at least the next 75years. The proposed simplification of the tax code would repeal or modify a number of popular tax breaks — including the deductibility of mortgage interest payments —so that income tax rates could be reduced across the board.
Under the plan, individual income tax rates would decline to as low as 8 percent on the lowest income bracket (now 10 percent) and to 23 percent on the highest bracket (now 35 percent). The corporate tax rate, now 35 percent, would also be reduced, to as low as 26 percent.
Even after reducing the rates, the overhaul of the tax code would still yield additional revenue to reduce annual deficits — a projected $80 billion in 2015.
But how low the rates are set would depend on how many tax breaks are reduced or eliminated. Some of them, including the mortgage interest deduction and the exemption from taxes for employees’ health benefits, are political sacred cows.
The Bowles-Simpson plan has a ratio of roughly $3 in spending reductions for every $1 in revenue increases, with an additional $673 billion in savings from reduced interest payments on the resulting lower federal debt.
“The Problem is Real – the Solution is Painful,” the chairmen wrote in their slide presentation to colleagues.
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