Yesterday’s blog posting by TAX PROF Paul Caron, titled “Republicans Introduce Taxpayer Choice Act”, reports on a very interesting tax proposal put forth by conservative Republican Representatives John Campbell of California, Jeb Hensarling of Texas, and Paul Ryan of Wisconsin.
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Under the proposed Taxpayer Choice Act –
Under the proposed Taxpayer Choice Act –
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· Taxpayers have a choice whether to continue under current income tax or opt into new system.
· Taxpayers have a choice whether to continue under current income tax or opt into new system.
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· There would be two tax rates: 10% on first $100,000 of income and 25% on income over $100,000 for joint filers (the threshold would be $50,000 for single filers).
· There would be two tax rates: 10% on first $100,000 of income and 25% on income over $100,000 for joint filers (the threshold would be $50,000 for single filers).
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· Capital gains and dividends continue to be taxed at a 15% maximum rate.
· Capital gains and dividends continue to be taxed at a 15% maximum rate.
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· The dreaded AMT would be repealed.
· The dreaded AMT would be repealed.
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· There would be a large standard deduction ($12,500 single; $25,000 joint), and
· There would be a large standard deduction ($12,500 single; $25,000 joint), and
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· A $3,500 personal exemption (a $39,000 no-tax threshold for a family of four).
· A $3,500 personal exemption (a $39,000 no-tax threshold for a family of four).
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· All current itemized deductions (including home mortgage interest, charitable contributions, and state and local taxes) and credits would be eliminated.
· All current itemized deductions (including home mortgage interest, charitable contributions, and state and local taxes) and credits would be eliminated.
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Actually it does not sound so bad. It is certainly worth serious consideration. My only question is why should taxpayers have a choice of tax “systems”? Why not just make the new system apply to everyone?
Actually it does not sound so bad. It is certainly worth serious consideration. My only question is why should taxpayers have a choice of tax “systems”? Why not just make the new system apply to everyone?
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A simple, semi-flat tax system would certainly not put me out of business, or even hurt my bottom line. As long as the fee for preparing the new simple return was reasonable (and my fees are certainly reasonable – actually perhaps unreasonably low) I believe that taxpayers, my clients included, would still prefer to have it prepared by a professional – either just to be sure it was done correctly or so they wouldn’t have to be bothered doing it themselves. And, as I have stated in the past, I would make a lot more money during tax season if I did nothing but 1040A short forms all day.
A simple, semi-flat tax system would certainly not put me out of business, or even hurt my bottom line. As long as the fee for preparing the new simple return was reasonable (and my fees are certainly reasonable – actually perhaps unreasonably low) I believe that taxpayers, my clients included, would still prefer to have it prepared by a professional – either just to be sure it was done correctly or so they wouldn’t have to be bothered doing it themselves. And, as I have stated in the past, I would make a lot more money during tax season if I did nothing but 1040A short forms all day.
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Besides, it appears there would still be Schedules C, D and E to deal with, enough remaining complications so that I would not become bored.
Besides, it appears there would still be Schedules C, D and E to deal with, enough remaining complications so that I would not become bored.
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Go to Paul’s post and click on the various informational links. After reviewing it carefully let me know what you think.
Go to Paul’s post and click on the various informational links. After reviewing it carefully let me know what you think.
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As a postscript, the Q+A on the Taxpayer Choice Act linked in the posting gives an excellent answer to “What’s so wrong with the AMT?” –
As a postscript, the Q+A on the Taxpayer Choice Act linked in the posting gives an excellent answer to “What’s so wrong with the AMT?” –
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“The Alternative Minimum Tax (AMT) was designed in 1969 as a mandatory add-on to the existing tax code. It was aimed at preventing 155 wealthy taxpayers from exploiting loopholes in the tax code to escape legitimate tax obligations. But because it was never indexed for inflation, the AMT next year will subject close to 30 million more taxpayers to an automatic tax increase.
“The Alternative Minimum Tax (AMT) was designed in 1969 as a mandatory add-on to the existing tax code. It was aimed at preventing 155 wealthy taxpayers from exploiting loopholes in the tax code to escape legitimate tax obligations. But because it was never indexed for inflation, the AMT next year will subject close to 30 million more taxpayers to an automatic tax increase.
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Most of these folks are far from rich. Under current tax law, for instance, in tax year 2007, about 70% of married taxpayers with children earning $75,000 to $100,000 {the taxpayers earn the $75,000, not the children - rdf} will be subject to AMT. Over the next 10 years, the AMT’s scope will impose $841 billion in higher taxes, mostly on middle-income families. Under the AMT law, these millions of taxpayers will be required to calculate their taxes two ways – under the existing code, and under the AMT = and then pay the higher tax. This is clearly an illegitimate tax that should be repealed without penalizing taxpayers.”
Most of these folks are far from rich. Under current tax law, for instance, in tax year 2007, about 70% of married taxpayers with children earning $75,000 to $100,000 {the taxpayers earn the $75,000, not the children - rdf} will be subject to AMT. Over the next 10 years, the AMT’s scope will impose $841 billion in higher taxes, mostly on middle-income families. Under the AMT law, these millions of taxpayers will be required to calculate their taxes two ways – under the existing code, and under the AMT = and then pay the higher tax. This is clearly an illegitimate tax that should be repealed without penalizing taxpayers.”
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TTFN
TTFN
3 comments:
"No thanks!" Re AMT, Adjust exemption amount for inflation! -- it's simple - not much for anyone to complain about. It's usually done every year. This year politicians think we need something exotic. We don't. Just permanently change the exemption amount and index in future for inflation!! - that's all that's needed!!!
(No one loses their favorite deductions --- all is well!.)
Sure, just so long as the exemption amount excludes YOU from the AMT - but what about me? Just kill the stupid AMT, so it will not apply to ANY of us.
What a relief this didn't pass...not a big fan of "choosing" which tax system you want. Don't get me wrong I'm all for freedom of choice, but let's not get carried away.
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