Tax Deduction Cap Idea Deserves Closer Scrutiny, Baucus Says

Cap could serve as part of the resolution for the looming fiscal cliff.

Capping tax breaks deserves a closer look as part of a resolution to the so-called fiscal cliff and an overhaul of the tax code, said Senate Finance Committee Chairman Max Baucus.

Similar-sounding ideas, such as a percentage limitation or a maximum dollar amount of deductions, can have disparate effects on taxpayers, the Montana Democrat said yesterday in an interview with Bloomberg News.

Market Reaction

The CBO estimates that averting the cliff would protect 3.4 million jobs. The Internal Revenue Service warned yesterday that there would be “serious repercussions” for the 2013 tax filing season scheduled to start in January if Congress fails to address issues that affect 2012 tax returns.

Biggest Benefits

Compared with a rate increase, any limit on tax breaks would disproportionately affect people who use the biggest benefits in the code -- those for charitable contributions, employer-sponsored health insurance, state and local taxes and mortgage interest.

‘Thoughtful Fashion’

Representative Earl Blumenauer, an Oregon Democrat, said lawmakers should be open to the idea of caps and breaks, noting that it was one of the few specifics Romney offered.

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