Tax Decuctions

If we keep the current system and try to reduce tax rates, the only way would be to reduce or eliminate certain tax deductions.

Now you could eliminate all of them, but that would be hurtful to certain supporters that the politicians rely upon, such as Political Action Committees posing as charities.

In general they are probably not going to touch charitable deductions, although the logic behind that is pretty vague.  Instead of collecting taxes and using it for the general welfare let people give the money to specific causes and deduct it from their income.

It does increase the amount contributed, but since it ultimately reduces tax burdens it is in a way federally funded and the causes could be any number of things a majority don't support.

Still, not likely to be touched.

Now state and local tax deductions are being considered, partly because they impact more blue state voters than red state voters it seems.  The reason for this deduction is pretty clear, the amount of your income that is used to pay taxes shouldn't be taxed again.  That assumes you consider your overall tax bill and not just the federal bit.

This is going to be a contentious issue and because of that is likely to be a deal breaker.  Maybe it can be offset in some way to get the needed support or it could lead to another outcome like health reform.

Deductions on retirement savings is another area that is being considered since it is large enough to make a difference.  Since it isn't going to be replaced with a better social security system, it isn't gong to help future retires prepare.

After that there are a  lot of other deductions, but most don't add up to a large enough percentage of the tax to be important. Things like medical and dental have to exceed a certain percentage of your income to be used.

However every tax deduction has its proponent and this will lead to "tinkering" and not much really changed except maybe a claim of political victory.

You really have to do it all over from scratch to fix it, and I don't see much chance of that.

Sometimes its not even clear what they are trying to fix.