Senior US Senator Foresees Opposition To Tax Panel Reform Proposals

by Mike Godfrey, Tax-News.com, Washington

27 October 2005

Sen Charles Grassley (R - Iowa) has warned that the tax reform panel's recommendations on limiting mortgage and employer-provided healthcare tax breaks would make it "very difficult" for the Senate to pass a package of new legislation aimed at simplifying the US tax code.

Earlier this month, the panel offered two plans to reform the US tax system, one based on retaining the current income tax system, but in a simplified form, the other based on the introduction of a consumption tax. Both plans proposed to limit interest deductions on home mortgages to a maximum of $313,000, down from the current level of $1 million.

The panel has also proposed that tax breaks for employer-provided health insurance be capped at $11,500 for families and $5,000 for individuals.

However, responding to questions from reporters regarding the issue on Tuesday, Grassley, who is chairman of the Senate Finance Committee, envisaged that these proposals would be certain to face opposition from Democratic lawmakers and would therefore face a problematic passage though Congress.

"When you start messing with sacred things like tax deductibility of health insurance and mortgage interest, particularly the latter, it's going to be very, very difficult to get that as part of a reform package," he stated.

Grassley predicted that a tax reform package would be much more likely to be passed if these two provisions were dropped from the legislation.

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