Comprehensive tax reform may be nothing more than a bipartisan pipe dream, according to a new United Technologies/National Journal Congressional Connection Poll that shows Americans think it's important for Congress to preserve many of the most popular—and most expensive—deductions up for debate.
Poll respondents were told the basic outline of the tax-reform process that’s been suggested in the Senate: eliminating "all tax breaks" and then debating "which to add back or replace." Interviewers then asked how important it was to keep five separate tax breaks, and majorities said it is "very important" to retain three: deductions on retirement savings accounts and mortgage interest, and for employers that offer health care benefits.
The clean-slate approach seems destined to lead to some jockeying on Capitol Hill over what tax breaks, if any, to retain as Congress tries to draft a package that lowers tax rates without reducing overall revenue. Although the poll does not tell respondents that an across-the-board rate cut is meant to underpin any deal, the results underscore the difficulty of summoning the political will that will be needed to scrap breaks in exchange for those lower rates.
The most important of the five deductions tested in the poll was the break "on tax-preferred retirement savings, such as savings kept in 401(k) plans.” Fully 63 percent of Americans say it is "very important" to retain that tax break, while another quarter said it was "somewhat important." Only 4 percent said it was "not too important" to keep it, the same percentage that said it was "not at all important."
Second was "the mortgage-interest deduction for people who own homes," which was deemed "very important" by 61 percent of respondents. Another 25 percent think it is "somewhat important," while a combined 9 percent say it is "not too important" or "not at all important."
Americans also want to keep tax deductions on employer-based health benefits, the poll shows. Nearly three in five, 59 percent, say it is very important to keep "the deduction for employers or companies that offer employees health care," and 29 percent say it is "somewhat important."
The least popular two deductions are the ones most associated with higher-income earners: 39 percent say it is "very important" to retain "the deduction for charitable contributions" and only 27 percent say it's "very important" to keep "lower tax rates for investment income, like capital gains and dividends." Still, Americans aren't ready to throw those provisions away; 76 percent say it's at least "somewhat important" to keep deductions on charitable contributions, and 61 percent say the same for lower tax rates on investment income.
Republicans are more likely to say it's "very important" to keep tax breaks on charitable contributions and investment income, while Democrats are more likely to support keeping the mortgage-interest deduction. There is no significant difference by party on retaining breaks for retirement savings and health benefits.
The poll was conducted July 18-21, surveying 1,000 adults via landline and cell phone. The margin of error is plus or minus 3.6 percentage points.
This article appears in the July 25, 2013, edition of NJ Daily.