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1 Michael Schuyler, Feldstein Proposal Increases Federal Revenues but the Devil's in the Details 1 (2013)

handle is hein.taxfoundation/ffdggxz0001 and id is 1 raw text is: April30, 2013 No. 366 Feldstein Proposal Increases Federal Revenues but the Devil's in the Details By Michael Schuyler, PhD Professor Martin Feldstein of Harvard has called for limiting the tax savings from itemized deductions, tax-exempt municipal bond interest, and the tax-free status of employer-provided health insurance.' Feldstein's plan would not allow the tax savings from these items to exceed 2 percent of adjusted gross income (AGI). For example, suppose that a couple has an AGI of $125,000. Also suppose the couple has itemized deductions, tax-exempt municipal bond interest, and employer-provided health insurance that together total $30,000. If the couple is in the 25 percent tax bracket, these deductions and tax exemptions lower their tax bill by $7,500. Professor Feldstein's plan would restrict the tax saving to $2,500 (2 percent of $125,000), which would increase the couple's tax bill by $5,000. Professor Feldstein claims that his plan would be a potent revenue raiser, trimming the federal budget deficit by $220 billion in 2013 if none of the extra revenue is diverted into higher government spending-a big if. As one exception to the cap, Professor Feldstein suggests sparing charitable donations from the limitation. He claims that if the cap ignored charitable contributions and the first $8,000 of employer-provided health insurance, the current year's deficit reduction would be $141 billion and the ten-year deficit reduction would be $2.1 trillion.2 Martin Feldstein, It's Time To Cap Tax Deductions, WASHINGTON POST, Mar. 12, 2013, -7;n_9_4 __?'___.__?tn__.; Martin Feldstein, A Simple Route To Major Deficit Reduction, WALL STREET JOURNAL, Feb. 20, 2013, h~ / hexjm&jk~ (Ol'4 7K~~M (47 6){7V~6~bn;Martin Feldstein, Daniel Feenberg, & Maya MacGuineas, Capping Individual Tax Expenditure Benefits, National Bureau of Economic Research Working Paper 16921 (Apr. 2011), h . t :!.k::... ffh fp!M, . 692.1. 2 See Feldstein, A Simple Route, supra note 1.