TAX REFORM PROPOSALS – FILING STATUS AND TAX CALCULATION

 
I believe EVERY taxpayer should be taxed exactly the same – regardless of marital status – under one tax rate schedule.  There should be neither a marriage tax penalty nor a marriage tax benefit. 
 
There should only be three filing categories – Single, Married Filing Joint, and Married Filing Separate. Married taxpayers can elect to file separately on one return or to file separately on separate returns.  The Head of Household filing status and Qualifying Surviving Spouse filing status should be done away with.  And there should only be one tax rate schedule for ALL taxpayers, regardless of filing status.
 
The Form 1040 (and 1040-SR – although I see no need for a separate 1040-SR) should have two columns for entering amounts of income, deductions. tax calculation, and credits - Column A for the numbers of a Single filer, the combined numbers of a married couple filing jointly, or the numbers of the first spouse if filing separately on one return.  Column B would be for the numbers of the second spouse filing separately on one return.   
 
Married taxpayers who elect to file a joint return on combined income and deductions would divide the total combined net taxable income by 2, calculate the tax on this one-half of combined income, and multiply the calculated tax liability by 2 to come up with the total combined tax liability, against which credits for exemptions would be applied.   
 
If, for example, the total combined reportable taxable income of John and Jane Q Taxpayer, after all allowable deductions, is $100,000, a tax liability would be determined on $50,000, half of the total, based on the one tax rate schedule.  If the tax liability on $50,000 was, as an example only, $5,000, the couple’s total tax liability would be $10,000.  Credits would reduce the $10,000 to come up with the total tax liability for the couple.
 
If a couple chose to file separately on one return and the husband had net taxable income of $60,000 and the wife had net taxable income of $40,000 the husband’s separate tax would be calculated on $60,000 and the wife’s separate tax would be calculated on $40,000, and credits applicable to each spouse would then be applied.  The couple could elect to make separate payments or one payment of the combined balance due, or request separate refunds or one refund.
 
Currently married taxpayers filing separate returns are not allowed to take advantage of some tax benefits available to Single filers – or a deduction, credit or limitation is the same on a joint (or combined on separate returns) as it is for a Single taxpayer.  For example, the maximum capital loss deduction is $3,000 for a single filer, $3,000 for a married couple filing joint, and $1,500 for a married taxpayer filing separately.  The same applies to the $10,000 SALT limitation.  Each spouse should be allowed the same amount as a Single taxpayer – a married couple should be allowed a $6,000 maximum capital loss deduction – or $3,000 each on separate calculations – and a $20,000 SALT limit (if it still remains, which I think it should not) – or $10,000 each on separate calculations.
 
As an aside – excess capital loss deductions should be allowed to be carried back as well as carried forward.  But that is a subject for another post.
 
The bottom line is that when a married couple files separately, whether on one or two returns, they would pay the exact same net combined tax they would pay if they were two Single filers.
 
If memory serves me, the ability to file separate returns on one form was allowed on New York state income tax returns back in the 1970s.
 
Your thoughts?
 
TTFN