Senators to Introduce Legislation to Cut Spending, Raise Revenue

Senator John Warner (D-VA) and Senator Saxby Chambliss (R-GA) have announced that they will introduce a spending reduction and revenue raising bill in the Senate. Yes, you read that correctly -- that's one Democrat and one Republican.

While, the bill has not yet been introduced, the Warner camp has leaked enough information that we have some pretty good hints about what to look for. Here is a summary.

• Change the tax treatment for mortgage interest from a tax deduction to a tax credit and place a cap on it that would make it apply to only the first $500,000 of a loan. Further, it would eliminate any deductions related to homes other than principal residences.
• Lower marginal federal income tax rates, presumably to the levels recommended by the Debt Commission (see my earlier post on the topic here: http://johnhlowell.blogspot.com/2010/11/debt-commission-retirement-plans-and.html )
• Gradually increase the Social Security Normal (full) Retirement Age to 68 by 2050 (people born in 1982) and to 69 by 2075 (people born in 2006). 
• Increase the OASDI (Old Age, Survivors and Disability Insurance) portion of Social Security tax on high earners. Presumably this means that the 6.2% OASDI rate will be extended from the Social Security Wage Base to infinity (and beyond for you Buzz Lightyear fans).
• Reduce Medicare benefits.
• Reduce defense spending.

There are a lot of sacred cows in there. This is going to be controversial. But, according to comments from Warner's office, everything needs to be in one bill for an up or down vote. He says that individuals shouldn't pick and choose, but should either say that this bill is right or wrong. As of now, there appear to be roughly 10 co-sponsors for this bill from both sides of the aisle. We'll keep you apprised as we learn more and are able to untangle what this means for compensation and benefits issues.