A plan to cut the US budget deficit from the president Barack Obama's deficit commission has won unexpectedly broad bipartisan support.
The commission's co-chairs, former Republican Senator Alan Simpson and the Clinton administration White House Chief of Staff Erskine Bowles, said it could be a blueprint for fiscal recovery in upcoming debates over taxation and spending.
Here are the plan's main highlights:
The plan calls for:
Overhauling the tax code and eliminating tax breaks to broaden the tax base and help lower overall income tax rates;
Cutting the deficit by nearly $4 trillion over the next decade, reducing it to 2.3 per cent of gross domestic product (GDP) by 2015, from 8.9 per cent in the last fiscal year;
Capping revenue as a share of the economy to 21 per cent and capping spending under 22 per cent, from the estimated 15.8 per cent and 25.1 per cent in 2011, respectively;
Stabilising growth in national debt by 2014 and reducing net debt, excluding Medicare and Social Security obligations, to 60 per cent of GDP by 2023 and 40 per cent by 2035, from 68.9 per cent forecast for 2011. On a gross basis, including Medicare and Social Security, the US debt was 92.7 per cent of GDP in October, the International Monetary Fund said.
On taxes:
Cutting income tax rates across the board and reducing the top rate to between 23 and 29 per cent, while reducing the number of income-tax brackets to three from six;
Simplifying corporate taxes by replacing the multiple brackets, which top out at 35 per cent, with a single rate between 23 per cent and 29 per cent;
Taxing capital gains and dividends at ordinary income rates, or raising top rates on ordinary income and excluding 20 per cent of investment income from taxation.
Raising the federal petrol tax (now 18.4 cents per gallon) by 15 cents per gallon to fund transportation;
Eliminating the Alternative Minimum Tax;
Limiting the deduction for interest on home mortgages by providing a 12 per cent nonrefundable tax credit and limiting the deduction to primary residences with a $500,000 cap;
Subjecting interest on newly issued state and municipal bonds to income taxes;
Keeping the earned-income tax credit and child tax credit, while eliminating itemised deductions so that all individuals take standard deductions;
Employer Provided Health Care Insurance: exclusion capped at 75th percentile of premium levels in 2014, with cap frozen in nominal terms through 2018 and phased out by 2038. Excise tax reduced to 12 per cent;
Charitable Giving - 12 per cent nonrefundable tax credit available to all taxpayers; available above 2 per cent of Adjusted Gross Income floor.
Retirement - Consolidate retirement accounts; cap tax-preferred contributions to lower of $20,000 or 20 per cent of income, expand saver's credit.
On discretionary federal spending:
Capping security and non-security spending, requiring equal percentage cuts from both security and non-security spending, and cutting low-priority programs;
Offering $50 billion in immediate cuts and sketching out $200 billion in illustrative 2015 savings;
Cutting White House and congressional budgets by 15 per cent; freezing the pay of members of Congress and federal workers and Defence Department civilians for three years; cutting the federal workforce through attrition; cutting travel and vehicle budgets; selling excess federal land;
Eliminating all congressional earmarks;
Capping discretionary spending through 2020: holding spending in 2012 to 2011 levels, returning spending to pre-2008 levels by 2013, and limiting future spending growth to half the projected rate of inflation through 2020;
Requiring the president to propose annual limits for war spending, while establishing a disaster fund to budget for catastrophes and making Congress define emergency spending.
On Social Security:
Gradually increasing retirement ages, based on increases in life expectancy;
After the Normal Retirement Age reaches 67 in 2027 under current law, indexing both the normal and Early Eligibility Age to increases in life expectancy, effectively increasing the normal retirement age to 68 by about 2050 and 69 by about 2075, and the earlier retirement age to 63 and 64 in lock step;
Gradually increasing the taxable maximum to cover 90 per cent of wages by 2050;
Reducing poverty by providing an enhanced minimum benefit for low-wage workers, while enhancing benefits for the very old and the long-time disabled;
Giving retirees more flexibility and creating a hardship exemption for those who cannot work beyond 62.
On health care cost containment:
Reforming physician payments, cost-sharing, malpractice law, prescription drug costs and government-subsidised medical education.
On mandatory saving:
Cutting agriculture subsidies;
Modernising military and civil service retirement systems;
Reforming student loan programs and the Pension Benefit Guaranty Corp.
