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“Who’s on First” with the Best Deficit Reduction Idea

deficit reduction ideasWell, it seems as if deficit-reduction watching has nudged baseball out as America’s favorite pastime!!  With a full count on the debt ceiling, Congress came together on August 2 to strike out the looming debt ceiling cap and hit a $1 trillion in spending cuts.  At the same time, lawmakers also agreed to come to grips with the monumental deficit.  The agreement created the “Dirty Dozen,” a bipartisan Joint Congressional Committee that is charged with moving forward additional deficit-reduction ideas of at least $1.5 trillion by November 23, 2011. Automatic, across-the-board spending cuts will ensue if Congress fails to come up with a specific plan by the end of December.

So what’s still in the field of play of ideas? 

Probably everything.  Contenders for what could get pitched include AMT repeal, reductions of individual rates (as low as 8%) and corporate rates, LIFO repeal, “tax expenditure” phase-out, oil and gas benefit reduction, inflation adjustments, and changes to the health care reform law.  (The AICPA champions AMT repeal as part of its reform recommendations.)

Congress is rounding first and heading to second but a lot of questions remain before they get to third, much less the home plate.  Will gas taxes go up?  Will changes be prospective or retroactive?  Will we have a replay of last year, with late action by Congress delaying the beginning of filing season? Will the IRS have enough time to get ready?  Who will be the tax winners and losers? Will we be safe or out? 

We don’t even know who’s playing on the team, like the mythical exchange between Sebastion Dinwiddle and Dexter Broadhurt (played by legendary comedians Abbott and Costello).

“Well, let’s see, we have the bags. Who’s on first.  What’s on second.  I Don’t Know’s on third.”

“Are you the manager?”

“Yes.”

“And you don’t know the fellows’ names?”

“Well, I should.”

“Well then, who’s on first?”

“Yes!”

Congressional tax committees held numerous hearings to consider possible individual and business reforms.  The Senate “Gang of Six,” while three members short of fielding a complete team, recently came up with a bipartisan plan. There’s also the Administration’s National Commission on Fiscal Responsibility and Reform, and the House Republican Study Committee.

Unlike Abbott and Costello, who hit a home run with their famous routine, I Don’t Know if Congress will be able to move the runners up into scoring position for specific deficit reduction, What’s going to be the exact strategy and Who’s gonna take credit for the winning game plan.  Maybe if we combine the “Gang of Six” with the “Dirty Dozen,” we could field two complete teams. 

The whole game could get forfeited by the structure of the committee.  Budget expert Stan Collender noted during AICPA’s Aug. 3 webcast that the Dirty Dozen may have a limited menu to choose from, given the Senate minority leader’s refusal to appoint anyone who would support a tax increase and the House minority leader’s refusal to select someone willing to cut Medicare, Medicaid, or Social Security.

So sit back, enjoy a dog and a beer, and watch the game.  I have a feeling we’ll all come out ahead no matter who wins.  And if it ends in a draw, we still get automatic deficit reduction.  What a busy and exciting fall we will have in the tax world. I know I’ll be busy coaching the AICPA’s Tax Team. 

“Who’s playing first.”

“That’s right!”

Edward S. Karl, CPA, Vice President of Taxation, American Institute of CPAs.

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