Oct. 13, 2005--The President's advisory panel on federal tax reform is scheduled to report its findings to the President on November 1st. Among the panel's expected recommendations are an end to the controversial Alternative Minimum Tax, a limit on health insurance deductions, and caps on mortgage interest deductions.
The panel, established in January, is expected to recommend ending the Alternative Minimum Tax for individuals. The AMT was originally created to ensure individuals in higher tax brackets be required to pay a minimum amount of tax, in an effort to keep them from ducking taxes through loopholes. But because of the broad definition of those required to pay the alternative minimum each year, the AMT affects a growing number of middle class families, 2.6 million in 2003 and an estimated 13 million in 2005.
The panel claims that eliminating the tax would result in a $1.2 trillion dollar loss over ten years. To make up for the lost revenue, the panel has been considering different changes to the tax code. The focus has shifted to health insurance and mortgage interest deductions, which will cost almost $250 billion this year alone.
Currently, employers can deduct the entire amount they pay for workers' health insurance. The proposal the panel has discussed would limit such tax-free payments to the amount the government pays for a federal employee's average premium, or about $11,000 a year for a family policy. The proposal also allowed those who pay for their own health insurance to receive the deduction.
Along with healthcare deductions, mortgage interest deductions may get altered. Currently, interest on mortgage loans up to $1 million are completely deductible. One proposal limits the deduction to a number assigned to each county by the Federal Housing Administration, a figure from $244,000 to $312,000.
The bi-partisan panel will make its recommendations to the President on November first. As an advisory committee, the panel's suggestions are not legal in any way, nor does the President have to stand by them. Any changes to the tax system would have to pass through Congress, where the changes may face opposition.