Breakthrough

25 Oct 2010 By James Pethokoukis

The group is eyeing $1 trillion in tax breaks as a way to slash the budget. Slaughtering sacred cows like the mortgage interest deduction may seem an impossible task. But America s 1986 system overhaul shows it can happen if tax rates are also lowered to lessen the sting.

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President Barack Obama's deficit commission is due to report on Dec. 1.

The revenue loss from tax expenditures for 2009 was about $1 trillion, according to the White House Office of Management and Budget. The three largest categories were housing (a loss of $185 billion), healthcare (a loss of $168 billion) and education and training (a loss of $108 billion), totaling $481 billion in foregone tax revenue.

In 1986, Congress reformed the tax code by simplifying income taxes, broadening the tax base, and eliminating many tax shelters and preferences. Individual income taxes went down, while corporate taxes were raised. It was the last major simplification of the U.S. tax code.

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