Our Fiscal Security, a partnership of progressive policy organizations Demos, the Economic Policy Institute and the Century Foundation, unveiled a deficit reduction plan Monday, devoting more attention to revenue increases than other proposals and keeping an “expansionary” fiscal policy until unemployment is below six percent.
The report calls for making the tax code more progressive. Some measures include: Eliminating the Bush tax cuts for top earners, reinstating the estate tax for married couples over $4 million, a cap-and-trade energy policy, capping itemized deductions at 15 percent, modifying charitable giving and mortgage interest tax benefits, taxing dividends as income, raising the gas tax and instituting a tax on banks with assets over $50 billion. On the other hand, the report also calls for expanding the Earned Income Tax Credit, making the Child Tax Credit fully refundable and extending the Making Work Pay Tax Credit.
The plan adopts the Sustainable Defense Task Force recommendations, headed by Reps. Barney Frank (D-Mass.) and Ron Paul (R-Tex.). It also calls for investments in public education, health care, infrastructure and public transit.
The plan has some overlap with the Simpson-Bowles deficit reduction plan, including increasing the amount of income subject to social security taxes, modifying the mortgage interest credit and an increase in the gas tax.
Overall, the plan includes some of the progressive goals that did not pass the last Congress with huge Democratic majorities — and are much less than likely to pass during the next Congress: A health-care plan with a public option did not make it into the final reform bill; the cap-and-trade bill passed the House, but not the Senate; a tax on the largest banks was dropped out of the financial regulation bill after Sen. Scott Brown (R-Mass.) negotiated it out for his vote.
In a nod to deficit reduction, President Obama is set to announce a federal pay freeze today for 2011 and 2012.