Grab Bag of Tax, Spending Proposals Eyed to Cut Deficit

The debt reduction plan did not raise the Social Security retirement age and instead called for raising the cap on Social Security payroll taxes (currently at $106,800) over the next 38 years such that 90 percent of all wages are covered, the target in 1983.

"The plan we're putting forward today will strengthen social security so it will pay benefits in a fair and equitable way for the next 75 years and beyond," said Bill Novelli, member of the debt reduction task force and former chief executive of the American Association of Retired Persons. "Our plan also slightly reduces the growth in benefits for the top 25 percent of beneficiaries as with current law. These changes are designed to increase incentive to work longer while not raising the retirement age."

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Professor Eissa said she disagrees because increasing the retirement age is necessary for the Social Security program's sustainability. "I think that absolutely has to be part of the reform," said Eissa. "We have to be careful how we adjust the program actuarially. But given life expectancy, the health of the program requires that we increase the retirement age."

Alternative Minimum Tax

Both the Bowles-Simpson and debt reduction plans eliminate the Alternative Minimum Tax (AMT), which aims to ensure that taxpayers who take special deductions and credits still pay a minimum amount. In 2009, Congress passed legislation which subjected fewer taxpayers to the AMT. But unless Congress acts soon, more people will have to file under its complex system, said Gott.

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GMA Quick Tips: Taxes

While the intent of the AMT was to prevent high-income taxpayers from avoiding federal income taxes, its reach has expanded.

"If the Bush tax cuts do lapse, we'll have less people in the AMT," said Gott. "On the other hand, some of the phase-outs have gone away this year so people who are in the AMT will be paying more. That's an issue middle-income tax payers get hit with and are surprised by."

For individuals, the 2009 rate was 26 percent for income up to $175,000 and 28 percent for higher incomes and taxpayers may not deduct for local and state taxes. The basic exemptions in 2009 were $46,700 for single individuals and $70, 950 for married couples filing jointly, according to H&R Block.

End to Bush Tax Cuts Looming

Simplifying the Tax Code

While both plans hope to simplify the tax code, the Bowles-Simpson proposal aims to place a cap on revenue from taxes at 21 percent of GDP, and to broaden the tax base, "lower rates and bring down the deficit," according to the draft presentation.

With that same goal in mind, the debt reduction plan, on the other hand, proposed to reduced income tax rates and decrease the number of tax brackets to two from six. The plan proposes two tax rates of 15 percent and 17 percent.

The long-term benefits of simplifying the tax code will have a positive effect on the economy through individuals and companies who are paying lower taxes, according to Eissa.

End to Bush Tax Cuts Looming

"I believe the best way to deal with deficit problem is through economic growth," said Eissa.

National Sales Tax

Another stark difference between the two proposals is the debt reduction plan's proposal to create a national sales tax of 6.5 percent, in part, to offset the possible decreased tax revenue.

"We think it's a moderate rate," said Alice Rivlin. "We think the tax package has to be seen as a whole, and will be pro-growth, pro-saving and investment and somewhat less pro-consumption."

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