From USA Today: Tax proposal for less paper, but fewer deductions
So Bush’s tax commission has decided to “simplify” tax forms — by eliminating many popular deductions in favor of a “family credit”, which would include raising the per-child deduction to $1,500. Also (and here’s the kicker that’s going to cost all of us), the tax commission, concerned about all the people being caught by the Alternative Minimum Tax, proposes to repeal the AMT.
This is probably great news if you’re affected by AMT (see below for percentages of people affected — and note the income ranges). Note that the numbers used to calculate AMT have never been adjusted for inflation.
However, here’s what will be eliminated or reduced to pay for AMT repeal:
- State and Local propery tax deductions
- Student Loan interest deductions
- Mortage interest and health insurance deductions
What will some people get?
- The “family credit” that rewards lots of kids
- A “savers credit” designed to encourage savings (if only our government did that, the people might follow suit!)
- “Dividends from a corporation’s domestic earnings would be tax-free; other dividends would be subject to a taxpayer’s ordinary rate, rather than the current 15%.”
- Non-itemizers could take deductions for charitable contributions and health insurance premiums.
Who gets hurt?
- My family (2-income, no kids). Virtually all of our major deductions would go away, saddling us with an even higher tax bill (and we already pay a lot!).
- California, New York, and New Jersey — and any state where people bought more house than they could afford, thinking, “well, I can deduct the interest”.
- People who don’t get corporate dividents (most Americans, I’d guess?)
From reading this article, it looks like the only way NOT to get screwed at tax time is to skip college, own nothing, and have a lot of kids. Or you could be super-rich, which is such a possibility for everyone in this country (</sarcasm>).
So, combine this rocket science plan with higher fuel taxes, higher interest rates, skyrocketing fuel costs, and the new bankruptcy bills, uncontrolled government spending, and a complete lack of fiscal policy, and we have a whole cookbook for economic disaster.
Wouldn’t it make more sense to just adjust the AMT numbers for inflation? But, heaven forbid this administration do anything sensible….
Who’s affected by AMT? Source