Posted on 04/24/2005 11:14:15 AM PDT by NormsRevenge
WASHINGTON - As taxpayers recover from finishing their annual filing chores, a presidential commission studying the tax laws has reached the conclusion that there are just too many deductions and credits.
Three credits and a deduction help taxpayers cut college costs. Special urban and rural tax zones encourage investment and job creation. Dozens of other tax benefits help families raise children and save for retirement, encourage adoption, nudge drivers toward hybrid cars and push businesses to invest in new equipment.
"We have lost sight of the fact that the fundamental purpose of our tax system is to raise revenues to fund government," according to President Bush's Advisory Panel on Federal Tax Reform.
The commission's chairman, former Florida Sen. Connie Mack, said its nine members have been surprised at the number of tax deductions and credits.
"It wasn't until we really had the opportunity to listen to so many different people talk about so many different aspects of the code that it really sunk in about how much and how often the code is being used these days to either create incentives or disincentives for either investment or behavior," Mack said in an interview with The Associated Press.
The White House budget office ranks the cost of a deduction for businesses that provide health insurance to employees as the top tax break, worth $126 billion next year. Also high on the list are the popular mortgage interest deduction, a capital gains break for home sales, a deduction for charitable contributions and the child tax credit.
The list includes many tiny tax breaks. Among them are ones that encourage biodiesel fuel, help the elderly and disabled, make interest on educational bonds tax-free and allow teachers to deduct the cost of school supplies.
The problem comes when taxpayers try to decipher the rules that govern those credits and deductions. The tax breaks often overlap and typically come with pages of instructions and qualifications.
"It was clearly stated that the level of complication has become so great that in many cases it ends up deterring the activity that you're trying to encourage," Mack said.
Bush has asked the panel to preserve tax breaks that promote homeownership and charitable giving.
Tax breaks started proliferating in the 1990s for two reasons, said Eugene Steuerle, a former Treasury Department official and co-director of the Urban-Brookings Tax Policy Center.
"There's always been this political reward for claiming to do something new rather than merely cleaning up or slightly expanding something that already exists," Steuerle said.
Lawmakers want to brand their own education tax breaks, for example, which means there are multiple deductions, credits and special savings accounts instead of one tax break everyone can use.
Tax breaks also provide benefits without creating a government spending program. But the proliferation of tax breaks end up costing the public because they mean lawmakers cannot lower income tax rates, Steuerle said.
"They make it look like smaller government, when in fact it's actually bigger government," he said.
The tax breaks amount to billions of dollars.
Tax benefits that provide indirect subsidies to homeowners add up to more than the entire budget of the Housing and Urban Development Department.
The earned income tax credit for low wage workers is bigger than any welfare program, including food stamps.
The tax break for businesses that provide health insurance is growing faster than almost all other domestic programs.
Some critics say no one tracks the tax breaks to find out if they succeed in promoting the behavior lawmakers want to encourage. Limitations often mean that some breaks are not available to wealthier taxpayers or poorer ones.
"It is worth noting that the deductions are of little or no benefit to the 40 percent of taxpayers who don't owe taxes," Fred Goldberg Jr., a former Internal Revenue Service commissioner, told the presidential panel.
Would taxpayers give up some of those deductions and credits to make the whole system simpler? Not likely.
"Anytime you've got a benefit, wherever it happens to be, whether it's spending or taxes, people don't want to give them up," Mack said.
This summer, the panel plans to recommend ways to make the tax laws simpler and fairer.
___
On the Net:
President's Advisory Panel on Federal Tax Reform: www.taxreformpanel.gov
I couldn't agree more!
And here's the the solution.
If Steuerle would go to work in the private sector, then we wouldn't be paying for this kind of flawed logic and sheer stupidity.
I wish I could find some braks that apply to me - with both my wife and I working, and me receiving military retirement pay, we still don't generate enough oomph to itemize. I guess that living within one's means has something to do with it, although some twit on the forum the other day tried to tell me that if I couldn't afford to pay cash for a car, I was being overly extravagant.
What's left unsaid is "and their pork-barrel projects, welfare, free medical coverage for illegal aliens, and other extravagant perks that taxpayers must pay for."
(What's left unsaid is) "and their pork-barrel projects, welfare, free medical coverage for illegal aliens, and other extravagant perks that taxpayers must pay for."
You got it friend. I really don't want to get started on this lazy, rainy Sunday about the marxist taxes to pay for unconstitutional crap I'm required to pay.
FMCDH(BITS)
a presidential commission studying the tax laws has reached the conclusion that there are just too many deductions and credits.
The more deductions and tax breaks, the more complexity on the law, and the higher the tax rates on what is left to tax.
A Taxreform bump for you all.
If you would like to be added to this ping list let me know.
John Linder in the House(HR25) & Saxby Chambliss Senate(S25), offer a comprehensive bill to kill all income and SS/Medicare payroll taxes outright, and provide a IRS free replacement that taxes every new consumer product once, but only once on first retail sale.
H.R.25,S.25
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information:
Clinton added a lot of these...
I think the Democrats want a million random tiny tax breaks (especially for their constituencies) in order to confuse the system and force the rates higher, at which point they can repeal the breaks.
I could use more tax breaks. The best tax break would be for the government to stop spending so much money.
I just read an article how churches get the shaft on charitable deductions because the low-tax bracket people are more inclined to donate to them & they genenarlly don't itemize.
Museums & charities to which rich lefties contribute get what basically amounts to a fed subsidy.
I wish they would stop lumping credits with deductions. There is no comparison between the "earned income tax credit" (a welfare program) and deductions for employee health benefits (a legitimate business expense).
How about stop giving refund(tax credits) to those who pay no taxes.
An employees daughter got $5,000 in refunds this year, working less than 40hrs/wk as a nursing home aide. 2 kids, one doesn't even live with her, won't pay her bills, used $1,000 of it to bail her boyfriend out of jail(he left her the next week), has a drug habit, I could go on and on.
Nobody in the IRS cares
http://www.taxhelponline.com/solver.htm
No national sales tax (FAIR Tax, Consumption tax, whatever you want to call it -- it's a national sales tax). If you think the Tax Monster is bad now, that tax would create one that makes this one pale in comparison.
Logic seems fine to me. What am I missing?
As Taranto would say, "What would we do without commissions?"
Anyway, I'll say "TOO MANY TAXES EXIST" -- and you don't even have to pay me any commission.
I assume that NRST is the "Fair Tax" or national sales tax? The kind with rebates on food purchases, etc.? The kind that requires record-keeping up the kazoo?
The flat tax can be filed on a postcard. You figure it out.
With the NRST everyone gets a rebate for taxes on essentials. The rebate is exactly the same for each individual, no matter how much they make. Why is record keeping necessary for that?
The flat tax requires that you send in a percentage of what you earn, allowing some deductions. You must keep a record of how much you earn no matter the form on which it is reported. More record keeping involved and income and FICA taxes are still deducted.
So Gramps & Mimi get the same rebate as Jake & Mabel and their twelve kids? That should make Gramps & Mimi happy, Jake & Mabel sad. Also, if the rebate is the same for everyone, why charge the tax on essentials in the first place?
Companies already send wage, interest and dividend form 1099's to their employees, contractors and investors, with copies to the IRS. That's your total income (except for under-the-table payments, which the payor then cannot deduct on its own taxes). Nothing new there.
My wife likes the FAIR tax over the flat tax, too. We've agreed to disagree, and I guess you and I can too.
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