The tax code has become so complex that senior members of Congress advocate starting over from a ‘blank slate”. Doing that, however, takes away everything to which many people have become accustomed.
There are 500 deductions today, according to the IRS. A blank slate approach would just zero them out, and that includes home mortgage interest deduction and a host of other popular things.
However, the objective is to produce a simple graduated income tax rate that is paid without complicating the process with deductions and associated accounting. As a result, tax filing and collecting becomes simpler, faster, and much less costly.
Questions: What about?
“Tax Relief in Disaster Situations Topic 107
Compensation Debts Topic 203
Innocent Spouse Relief (Including Separation of Liability and Equitable Relief) Topic 205
Dishonored Payments Topic 206
Renting Residential and Vacation Property Topic 415
Farming and Fishing Income Topic 416
Earnings for Clergy Topic 417
Unemployment Compensation Topic 418
Gambling Income and Losses Topic 419
Bartering Income Topic 420
Scholarship and Fellowship Grants Topic 421
Social Security and Equivalent Railroad Retirement Benefits Topic 423
401(k) Plans Topic 424
Passive Activities – Losses and Credits Topic 425
Stock Options Topic 427
Traders in Securities (Information for Form 1040 Filers) Topic 429
Receipt of Stock in a Demutualization Topic 430
Canceled Debt – Is It Taxable or Not? Topic 431
Adjustments to Income Topic 450
Individual Retirement Arrangements (IRAs) Topic 451
Alimony Paid Topic 452
Bad Debt Deduction Topic 453
Moving Expenses Topic 455
Self-Employment Tax Topic 554
Alternative Minimum Tax Topic 556
Additional Tax on Early Distributions from Traditional and ROTH IRAs Topic 557
Additional Tax on Early Distributions from Retirement Plans, Other Than IRAs Topic 558
Tax Credits Topic 600
Earned Income Credit Topic 601
Child and Dependent Care Credit Topic 602
Adoption Credit and Adoption Assistance Programs Topic 607”
Read the story from The Hill about the politics of tax code revision at the referenced link. There is a whole lot of work to do to streamline the tax code.
Here is a list of things that will go away under the “blank slate” approach:
“Student Loan Interest Deduction Topic 456
Tuition and Fees Deduction Topic 457
Educator Expense Deduction Topic 458
Medical and Dental Expenses Topic 502
Deductible Taxes Topic 503
Home Mortgage Points Topic 504
Interest Expense Topic 505
Charitable Contributions Topic 506
Miscellaneous Expenses Topic 508
Business Use of Home Topic 509
Business Use of Car Topic 510
Business Travel Expenses Topic 511
Business Entertainment Expenses Topic 512
Educational Expenses Topic 513
Employee Business Expenses Topic 514
Casualty, Disaster, and Theft Losses (Including Federally Declared Disaster Areas) Topic 515
Tax on a Child’s Investment Income Topic 553
Excess Social Security and RRTA Tax Withheld Topic 608
Retirement Savings Contributions Credit Topic 610
Repayment of the First-time Homebuyer Credit Topic 611”
“Tax reform plan puts small breaks at risk
By Bernie Becker and Erik Wasson – 06/30/13 06:00 AM ET
The zero-break tax reform strategy favored by the top tax writers in both chambers underscores the challenge in rewriting a code where expensive provisions have also proven politically popular, according to both lobbyists and lawmakers.
In effect, Senate Finance Chairman Max Baucus (D-Mont.) and Sen. Orrin Hatch (R-Utah), the tax-writing committee’s ranking member, stripped the tax code clean of preferences, and asked their 98 colleagues to make a positive case to get their favored tax breaks back into the system.
House Ways and Means Chairman Dave Camp (R-Mich.), who has been working closely with Baucus on tax reform for years, has endorsed a similar strategy.