Can we put itemized deductions back on the table?

CAN WE PUT ITEMIZED DEDUCTIONS BACK ON THE TABLE?…. There are a variety of options when it comes to paying for health care reform, and since all of them lead to producing more government revenue, there are political problems associated with each.

The method that President Obama prefers happens to be one of the few options lawmakers are reluctant to even consider. It’s interesting, then, that the president continues to talk about it. In an interview aired this morning on NBC’s “Today,” Obama responded to a question about financing reform.

“I think the best way to do it is, lower the itemized deductions for people who make a lot of money, like me. And if we do that, we can pay for it, and ultimately, this will pay for itself.”

Sounds right to me.

Obama first started sketching out his plan on itemized deductions in February. There are already limits on charitable deductions for the wealthy, but the administration expressed support for tinkering with those limits a bit. As Noam Scheiber recently explained, ‘[C]apping the charitable deduction at 28 percent for affluent people (who would otherwise be able to save 35 cents on each dollar they give to charity, because that’s the marginal tax rate they face) strikes me as a pretty reasonable/equitable way to finance healthcare.”

According to administration estimates, the change would generate about $318 billion over the next 10 years.

Congress quickly balked, arguing that it would seriously undermine America’s charities, but it’s worth noting that Warren Buffett, one of the nation’s most generous philanthropists, announced his support for the idea as recently as last week.

What about the questions about adverse charitable implications? The invaluable Center on Budget and Policy Priorities did a helpful report on this in March.

President Obama’s proposal to limit the tax deduction for charitable contributions would affect only the top 1.2 percent of affluent U.S. households and, despite claims to the contrary, would reduce total charitable contributions by only 1.3 percent. […]

This proposal has been attacked on the grounds that it would lead to substantial reductions in charitable contributions and hit charities at a time when they face increased need and decreased contributions due to the recession. Careful examination indicates that these criticisms are greatly exaggerated or wrong.

A “surtax” seems controversial. Taxing benefits is probably even more controversial. Maybe lawmakers can give the itemized-deductions plan another look?