Thursday, October 28, 2010

Key Tax Breaks at Risk as Panel Looks at Cuts

In just a few weeks a deficit commission is planning to submit recommendations for balancing the federal budget by 2015. Experts predict that they will recommend getting rid of a handful of popular tax breaks including the mortgage interest deduction. Although they are popular among American taxpayers, the tax incentives reportedly cost the government about $1 trillion a year.

The Wall Street Journal reports

    At stake, in addition to the mortgage-interest deductions are child tax credits and the ability of employees to pay their portion of their health-insurance tab with pretax dollars. Commission officials are expected to look at preserving these breaks but at a lower level, according to people familiar with the matter.

    The officials are also looking at potential cuts to defense spending and a freeze on domestic discretionary spending. It is unclear if the 18-member panel will be able to reach an agreement on any of the items by a Dec. 1 deadline.

    Even if they do reach an agreement, any curbs on current tax breaks would likely face tough sledding in Congress. The banking and real-estate lobbies have fiercely rebuffed efforts to rescind the mortgage-interest deduction in the past.

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