by Mark Silva

Train wrecks ahead:

The Social Security trust fund will run out of assets in 2041, the program's trustees said today, repeating an earlier projection. And spending on Medicare will reach a legal limit much sooner -- by 2014 -- requiring the next president to propose changes to avert the first train wreck.

"As the baby boom generation moves into retirement, these programs face progressively larger financial challenges," Treasury Secretary Henry Paulson, one of the trustees, said at a press conference today. "The Medicare program poses a far greater financial challenge than Social Security."

Social Security will also start paying out more in benefits than is collected in payroll taxes by 2017, according to the report of the Social Security trustees released today. In order to keep the program on track, Paulson said, the payroll tax rate will have to be raised by 3.2 percentage points or benefits cut.

“"This report confirms the need for action,’’ Paulson said. “The sooner we take action to strengthen Social Security's financial footing, the less drastic the needed reforms will be, and the fairer reforms will be to future generations.’’

The reports brought quick commentary from the White House as well as the presidential campaign trail.

by Frank James

For all those who like to read about the minutiae of Washington policy proposals the way others like to read about Lindsay Lohan's latest doings, we offer the "paper" on the new tax proposal from House Ways and Means Chairman Charlie Rangel.

"Paper" is what we reporters call the handouts policymakers give out to help us understand the ins and outs of often complex proposals. You'll often hear reporters at Washington press conferences ask, "Got any paper?" the same question people asked at Grateful Dead concerts, but with a different meaning.

This copy actually contains the scribblings a real-live reporter who was obviously doing some quick calculations. Warning: you'll need a tax accountant to understand some of what is discussed here.

by William Neikirk

The Democrats' top tax writer in the House unveiled a $1.3 trillion plan Thursday that would cut taxes for millions of middle-income Americans, raise them on the wealthy, and do away with the alternative minimum tax, which is increasingly hitting taxpayers of modest means.

Rep. Charles Rangel (D-N.Y.), chairman of the House Ways and Means Committee, called his proposal "the mother of all tax reforms." Republicans called it the "mother of all tax hikes" and vowed to fight it.

Even if his proposal faces an uphill battle, it is likely to produce the mother of all lobbying efforts on Capitol Hill and become a controversial issue in the presidential race. Rangel said he did not expect passage this year and wanted to see how it would fly in 2008. (Rangel, pictured above.)

Both parties are trying to seize the advantage on taxes, with Democrats accusing Republicans of favoring the wealthy with their tax cuts and the GOP accusing Democrats of raising taxes and harming the economy. Many analysts say that true tax reform will ultimately have to be bipartisan.

"I'm willing to work with any president, no matter who she is," Rangel told reporters in an obvious reference to his favorite candidate, Sen. Hillary Clinton (D-N.Y.). But he said he had not consulted her or any other presidential candidate in writing the bill.

For more, see the rest of the story in today's Tribune:

By Mike Dorning

Democratic presidential candidate Barack Obama is to deliver a speech today proposing tax cuts for low- and middle-income families worth about $80 billion to $85 billion, according to his campaign.

An advance look at the tax cut proposal provided by his campaign describes a would tax credit that would give low- and middle-income wage-earners up to $500 off their income taxes. The benefit would phase out for people making "about $150,000 to $200,000," according to a campaign official who briefed reporters on the plan but declined to be identified.

Moreover, the tax credit would be refundable for people who earn wages, which essentially would expand the Earned Income Tax Credit that provides government payments to very low-income workers.

The contours of the tax cut repesent the very opposite approach to that used by the Bush Administration in its tax cuts. Since the Bush Administration cut tax rates, most of the benefit went to higher-income people. And the Obama campaign already has announced it would reverse the Bush Administration tax cuts for families earning more than $250,000 per year.

The campaign says it would offset the cost of the tax cut by eliminating corporate tax loopholes including tax breaks given to the oil and gas industry, curtailing the use of tax shelters and raising the tax on capital gains and dividends to as high as 28 percent.

by William Neikirk

Rep. John Dingell (D-Mich.) has a plan for combating global warming. He would slap a 50-cent per gallon tax on gasoline, end the mortgage tax deduction for so-called "McMansions," and tax and put a cap on carbon dioxide emissions.

Proposals by a single congressman are usually not so noteworthy, but Dingell happens to be the powerful chairman of the House Energy and Commerce Committee and accustomed to getting his way in Congress.

But the question is whether the House Democratic Leadership will go this far. He and Speaker Nancy Pelosi (D-Calif.) are often at odds on energy policy. But when Congress comes back this fall, legislation to combat climate change will be considered by the House.

He outlined his ideas in a town hall meeting in Ann Arbor Tuesday, according to a story in today's Detroit Free Press.

Posted by William Neikirk at 1 p.m. CDT

Bill Thomas has found a job.

You remember him? Once he was a household name in this town. California Republican big-wig, chairman of the House Ways and Means Committee, a suffer-no-fools-gladly, take-no-prisoners kind of guy who helped get Bush's tax cuts passed.

He wasn't the most liked member of Congress, but he got things done. Now he's going to have to make nice to the members as a lobbyist.

Posted by William Neikirk at 6:30 a.m. CDT

On this oft-despised day, otherwise known as Tax Day, most people would agree that our tax system is broken, a mess, needlessly complex, in many cases unfair and terribly inefficient.

There isn't much agreement on what to do about it. It could be that our political system is broken, a mess, needlessly complex, in many cases unfair and terribly inefficient. Listening to each party makes one realize how hard it will be to fix, if it can be fixed at all.

Posted by William Neikirk at 8:15 a.m. CDT

House Democrats say the alternative minimum tax (AMT) has turned into a "parent penalty" weighing heavily on middle class families and that overhauling it has become their top tax-reform priority.

Rep. Rahm Emanuel (D-Ill.), chairman of the House Democratic Caucus, said in the Democrats' weekly radio address that "now is the time for a middle-class tax cut" built around reform of the controversial levy.

Emanuel's address signaled a major effort by Democrats to lay claim to the tax-cut issue that has been a key part of Republican economic orthodoxy since Ronald Reagan's presidency.

Posted by Andrew Zajac at 6:30 a.m. CDT

For about 50 weeks each year, the Internal Revenue Service tends to keep a low profile.

But in the run-up to the filing deadline, which this year falls on April 17, the Tax Man emerges from the federal bureaucratic fog armed with reports and press releases, the better to remind the citizenry to play it straight on the 1040.

Posted by Andrew Zajac at 6:30 a.m. CDT

For about 50 weeks each year, the Internal Revenue Service tends to keep a low profile.

But in the run-up to the filing deadline, which this year falls on April 17, the Tax Man emerges from the federal bureaucratic fog armed with reports and press releases, the better to remind the citizenry to play it straight on the 1040.

Posted by William Neikirk at 9:20 a.m. CST

Musings on a new Congress:

President Bush wants a balanced budget by 2012. He's never pushed such a thing before. Besides, he'll be leaving office in 2009. And guess what? He thinks it can be done without raising taxes. Good luck.

The president is getting a lot of praise for finally recognizing that he needs to shed his image of a conservative big spender. A good development, said the Concord Coalition's Bob Bixby. But leave it to Leon Panetta, Clinton's former budget director and chief of staff to dismiss the move. "This is just happy talk," he said.

Posted by Frank James at 11:31 am CDT

I had a story in Sunday’s Chicago Tribune on the Congressional Black Caucus, the thrust being that if Democrats win the House back, the caucus members stand to pick up several important committee chairmanships. Download black_caucus_story.pdf

For instance, Rep. Charlie Rangel (D-NY) would become chairman of the House Ways and Means Committee which makes tax and spending decisions and is usually preceded by the adjective "powerful." Rep. John Conyers (D-Mich.) would become chairman of the House Judiciary Committee. Rep. Bennie Thompson (D-Miss.) would chair the House Homeland Security Committee.

Posted by William Neikirk at 1:15 p.m. CDT

It seemed like a simple piece of legislation. Sens. Barack Obama, Illinois Democrat, and Tom Coburn, Oklahoma Republican, two men at opposite ends of the political spectrum, joined in sponsoring it. But it was difficult to pass.

All it would do is establish a federal, searchable computer database of $1 trillion in federal grants, contracts, loans, and "earmarks" or special spending advocated by individual members of Congress. (Earmarks usually go by another name--pork). You could type in "Halliburton" and all its contracts would come up. Similarly with "Planned Parenthood" or "Sierra Club."

Posted by William Neikirk at 4:50 p.m. CDT

The bill that the Senate passed Thursday night to protect your pension also might protect wildlife around the world. At least, that's what the Humane Society of the United States tells us.

It seems that Sen. Charles Grassley (R-Iowa) included an amendment in the bill to crack down on a tax loophole exploited by so-called "trophy hunters." According to the society, trophy hunters have used a tax break for taxidermy to deduct the cost of their hunting excursions around the globe. The new provision will save taxpayers $43 million over the next decade, the society said.

Posted by Frank James at 8:00 am CDT

"Tax Haven Abuses: The Enablers, The Tools and Secrecy"

That was the title of a hearing held Tuesday by the investigations subcommittee of the Senate Homeland Security and Governmental Affairs Committee.

The hearing examined how wealthy Americans avoid taxes by tying their assets to trusts set up in off-shore locations like the Cayman Islands, Togo and the Isle of Man. The trusts allow transactions related to those assets to remain secret. Money launderers have also found them to be very handy places.

Posted by William Neikirk at 1 p.m. CDT

As the former head of Goldman Sachs Group, Henry "Hank" Paulson understands the bottom line. As he was sworn in today as the new Treasury secretary, it was clear that he also appreciates and understands Washington symbolism.

The big guys turned out. Power surrounded him. President Bush came to the Treasury Department to make remarks. Chief Justice John Roberts administered the oath of office. And in the audience was Federal Reserve Chairman Ben Bernanke, along with House Majority Leader John Boehner (R-Ohio).

Posted by David Lightman at 11:00 am CDT

Ned Lamont, the Greenwich businessman challenging Joe Lieberman in Connecticut's Democratic Senate primary, is charging Lieberman is not effectively helping pump federal dollars into the state. In fact, Lamont says, Connecticut ranks 49th by one measure of federal spending per capita.

True by one measure, but trying to figure out whether Connecticut or any other state gets a generous or skimpy amount of money from the federal government is difficult-and it’s easy to make either argument.