Presidential Tax Reform Panel Speaks.

The President's Advisory Panel on Federal Tax Reform provided the first insight into where it wants to take the Internal Revenue Code today.

The mortgage interest deduction could be capped at $350,000 and would not provide more than a 25% tax reduction even for taxpayers in the 35% bracket (perhaps by converting it from a deduction to a tax credit, possibly adjusted to fit regional housing prices). Employer paid health insurance deductions might be limited to about $11,000. In exchange, the AMT might be repealed. More radical proposals, like a national sales tax, were rejected.

President George W. Bush's tax advisory panel agreed to recommend limiting tax breaks for homeowners and employer-provided health-care benefits to help pay for repealing the alternative minimum tax.

The panel, in a meeting in Washington today, agreed the current $1 million cap on deductible mortgage interest should be reduced to about $350,000 and that the deduction should yield no more than a 25% tax savings compared to a top savings now of about 35%. Separately, the panel said it would probably recommend capping tax breaks on employer-provided health-care plans. Current law allows employers to deduct the value of premiums paid on behalf of their workers without the benefit being considered taxable income to the employee. The panel discussed placing the cap at the maximum amount the federal government pays in premiums for its workers, currently about $11,000....

According to the New York Times, the availability of the charitable deduction would be expanded (implying, for example, an above the line deduction).

All of these ideas are good ones. A final report is due in three weeks on November 1, 2005.