The New Plan In Town

Chait falls for another deficit reduction plan:

This plan, by Alice Rivlin and Pete Domenici of the Bipartisan Policy Center, looks a lot more solid [than Simpson-Bowles]. None of the crazy unenforceable caps and wild plans to slash the federal workforce without reducing its responsibilities. It's actually a balanced proposal to distribute pain. It also sensibly includes a short-term payroll tax holiday to address the economic crisis. And the tax reform, while lowering the corporate and top income tax rates to 27%, which is below the lowest point Ronald Reagan cut them to, also makes the overall burden more progressive.

I was impressed too, especially by the front-loaded payroll tax cut. Gleckman's analysis:

Recognizing the continued slow economic recovery, this deficit reduction plan actually starts with a tax cuta 2011 payroll tax holiday. The fun starts after that. The BPC would eliminate nearly all itemized deductions and kill or scale back most other targeted tax breaks. Among the ideas: It would restructure credits for low-income households by repealing the earned income credit and the child credit, while replacing them with a new child credit and a separate earnings credit. It would gradually eliminate the exclusion for employer-sponsored health insurance. And it would tax capital gains and dividends as ordinary income, except for a very modest exclusion ($1,000 for couples) for long-term gains.

The plan would create a new 15 percent refundable tax credit for charitable gifts and replace the mortgage deduction with a 15 percent refundable credit for up to $25,000 in interest. People could still contribute to tax-advantaged retirement savings accounts, but workers and their employers could only kick in an annual combined maximum of $20,000.