New Gregg-Wyden Tax Law Coming?

[Henrij]

Will this pass?

http://gregg.senate.gov/imo/media/doc/Wyden-Gregg%20Two%20Pager.pdf

[DaveO]

Nahhhh makes too much sense.

[erchess]

Another Point

Even if we simplify things someone is going to find a loophole and get the courts to agree that they can do something the IRS didn't think they should be able to. Then Congress will be outraged and pass something that closes this loophole but opens up several others and within ten years the code will be as complex as it is now.

On the other hand this might be a lean ten years for those of us who work mainly with less than very rich individuals and of course entities. The leanness would be worsened if the IRS keeps speeding up direct deposit and expanding the number of people entitled to free self preparation and electronic filing.

[taxxcpa]

Gregg-Wyden

I heard them discussing it on CNBC. The idea was to cut all the credits and exemptions and triple the standard deduction so that most people could file a one-page tax return.

It might cut down on the need for tax preparers, but it would be a lot better for the public if only the fat-cats needed to pay a pro to do their taxes.

[veritas]

I agree

It might cut down on the need for tax preparers, but it would be a lot better for the public if only the fat-cats needed to pay a pro to do their taxes.

Can you imagine Charlie Rangle doing his own taxes?

[Snaggletooth]

Heard It Before

So the pendulum swings back to tax simplification, does it?

It's happened before. Not only was it proposed, it was actually implemented. Only two tax brackets. Enlargement of the standard deduction. Elimination of deductions and credits. Elimination of preferential capital gains and other special rates for different types of income. Dramatic drop in corporate tax rates. Predictions that thousands of tax preparers would go out of business.

This was not just someone's pipe dream. It actually DID happen. So much simpler, the existing code had to be renamed!

It's called the 1986 Tax Code.

Really worked, didn't it?

[taxxcpa]

Rangel

Can you imagine Charlie Rangle doing his own taxes?

Charlie would probably do a good job with getting all the expenses (and then some), but might have trouble getting all the income on his return.

[Jiggers]

Simplification

Too bad the newscaster AND the politicians have no clue about preparation of tax returns.

Simplification, one sheet/postcard return. Ha!

I do hardly any returns with just a W-2. Most have a Schedule C, several E's, and a Schedule F, all with many depreciation items, some even have 200 or more assets on depreciation.

How would those returns be done on one sheet/postcard?

Same applies to a flat-tax proposed by some. How is that calculated? On the gross or net? What goes into determining the net.

And those that get those lovely $4000 - $9000 refunds each year from EIC and CTC wouldn't get them! That might be OK, but like someone said about something else, "...when pigs fly...". And we did have the "Swine Flu".

Just political hype.

[Black Bart]

I'll be whistling past the graveyard

...
On the other hand this might be a lean ten years for those of us who work mainly with less than very rich individuals and of course entities. The leanness would be worsened if the IRS keeps speeding up direct deposit and expanding the number of people entitled to free self preparation and electronic filing.

until this thing passes or dies. If they triple the standard deduction I might as well hang up my Dell and pack my bags. Things'll be so slow here in Dogpatch that FreeFile will be complaining.

Still -- regardless of our professional fate -- I'd like to inject a little historical perspective: An older lady in my office recently, having heard a young couple happily chatter about their forthcoming $5K refund, mentioned that 30 years ago her family usually paid taxes; at least $200 or so...or broke even...or had no more than $200 coming back. I remember those days (probably some of you do too) -- tax season meant telling many people they owed money and it wasn't a pleasant time. The atmosphere then was much more serious and somber than now as we hand out good-sized refunds to many clients -- not all, but quite a few.

My point being, the majority of people don't seem to be paying much tax nowadays. As the giveaway programs become permanent, at some point there's simply more money going out than coming in. I'll have one couple making $60-70K and they've paid in maybe $2K after all credits -- meanwhile three couples have left with $5K each in hand. We're awash in credits now and they continue to gush forth from congressional representatives anxious to get credit for a new dole-package.

My view about this may be regionally distorted/biased because the "noble poor" down here in broke-folks territory aren't throwing much in the till. Hopefully the "evil rich" (served by our worthy colleague Lion up in fat-cat country) who are said to pay over half the taxes in this country will make up the shortfall.

I hope somebody is paying because I can't see how the money can keep flowing out like water without looting the treasury and bankrupting the country.

[Bees Knees]

They can increase the standard deduction by a factor of 10, and it still will not work. The minute something like this gets introduced, people like me come along and explain to clients how their refund will go down drastically. Why?

No more refundable EIC.
No more refundable FTHBC
No more refundable education credit.
No more refundable child tax credit.

Refundable credits mean more money back, even for those who would otherwise pay zero taxes. The minute the government went down the refundable credit road, any hope of tax simplification died forever.

[DaveO]

I agree with Bees. To simply the tax code we must first dispense will all refundable tax credits. Use the code for what was intended; To raise the funds needed to provide the basic services of government. I have no fear that tax "simplification" will put preparers out of a job anytime soon.

[Lion]

Paying

Don't worry, Bart, my clients are still paying IN to the tax system!

[JON]

What a concept start to get tax law out of life style

They can increase the standard deduction by a factor of 10, and it still will not work. The minute something like this gets introduced, people like me come along and explain to clients how their refund will go down drastically. Why?

No more refundable EIC.
No more refundable FTHBC
No more refundable education credit.
No more refundable child tax credit.

Refundable credits mean more money back, even for those who would otherwise pay zero taxes. The minute the government went down the refundable credit road, any hope of tax simplification died forever.

The Prez did announce he wanted to take more off the income tax rolls. The only thing different to his - I have heard, is he wanted to double the child tax credit. I would be for it 100%. The current is a complete joke - the education credit props up education to be paid way more than it is worth, FTHBC is just a market problem, that may make it worse in the long run and EIC the Prez can stand out on the street and give the money away in cash-it will have the same result with a lot less fraud. Maybe some one will stop screwing the future generations life style for them to have their current live style to be maintain.

I think the Prez's version of change is closer to what Charlie had in 2007, but he would be willing to change.

[David1980]

Doubling the child tax credit? Nah, they should give you double for not having kids. Kids are such a resource drain on the system, may as well reward people who either don't have kids or can support the kid without government handouts.