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Tax Deductions
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The President and leading Members of Congress have indicated that income tax reform is a major policy objective. Some itemised deductions are visible candidates for "broadening the base" of the individual income tax and cutting back on tax expenditures and primarily consist of deductions for mortgage interest, state, and local taxes, and charitable contributions. The benefits of itemised deductions are concentrated among higher-income individuals, and that is particularly the case for state and local income tax deductions and charitable deductions. Proposals for addressing these provisions fall into two general classes. One approach could include repealing or restricting all itemised deductions. A different approach would consider each type of deduction and tailor a reform to the particular objectives and merits of the deductions, such as a lower ceiling on home mortgage interest deduction and a floor for charitable contributions. This book analyses various proposals to restrict itemised deductions, both across-the-board and individually tailored, using standard economic criteria of economic efficiency, distribution, simplicity, and estimated revenue effects.
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