Restrictions on Itemized Tax Deductions: Policy Options and Analysis [March 10, 2014] [open pdf - 532KB]
"The President and leading Members of Congress have indicated that income tax reform is a major policy objective. Some itemized deductions are visible candidates for 'broadening the base' of the individual income tax and cutting back on tax expenditures and primarily consist of deductions for mortgage interest, state and local taxes, and charitable contributions. The benefits of itemized deductions are concentrated among higher-income individuals, and that is particularly the case for state and local income tax deductions and charitable deductions. Proposals for addressing these provisions fall into two general classes. One approach could include repealing or restricting all itemized deductions. A different approach would consider each type of deduction and tailor a reform to the particular objectives and merits of the deductions, such as a lower ceiling on home mortgage interest deduction and a floor for charitable contributions. This report analyzes various proposals to restrict itemized deductions--both across-the-board and individually tailored--using standard economic criteria of economic efficiency, distribution, simplicity, and estimated revenue effects. In particular, this report estimates each proposal's potential to contribute to revenue-neutral reductions in income tax rates and the consequences for economic behavior. For an introduction to tax deductions, see CRS Report R42872, 'Tax Deductions for Individuals: A Summary,' by Sean Lowry. For general tax data analysis on itemized tax deductions, see CRS Report R43012, 'Itemized Tax Deductions for Individuals: Data Analysis, by Sean Lowry.'"
CRS Report for Congress, R43079