News from Kiplinger Tax Letter

[zeros]

The outlook for overhaul is similar on the individual income tax side. The Obama commission reform proposal illustrates the difficult choices: The current six tax brackets would be collapsed into three...12%, 22%, and 28%. The minumum tax and the phaseouts of itemized deductions and personal exemptions for high incomers would be permanently repealed too. But the price would be steep: Itemized deductions would be nixed, other than mortage interest and donations. Those two write-offs would be converted into a 12% tax credit, with mortgage interest on second homes made ineligible and only donations exceeding 2% of AGI qualifying. No special tax rates for capital gains and dividends. Interest on newly issued bonds of state and local governments would be taxed. Partial taxation of health coverage provided by employers. Plus elimination of most other tax breaks, with key exceptions for the earned income credit and the child credit. The Kiplinger Tax Letter

[MAJ]

Argghhh...

Funny - I received a polically motivated call the other days asking if I would answer a few questions. One of them was - How would you feel if they removed the Mortgage Interest Deduction. I said, What? I prepare taxes - I know if you do that their will be bodies in the streets from distressed tax payers. I have one client who makes about $40k. She paid $10,302 in interest.. Just interest. That alone is 25% of her paycheck before taxes!! Luckily her property taxes were only $3,580.00 - Total Itemized - $18,300. on $40k. And I can say there's honestly NOTHING event questionable about her return. That's the sad part.

In the end with 3 tax brackets people will suffer.
I'd vote for a reduction of the tax brackets by 5% and in turn take a 5% Federal Sales Tax Credit - Let's collect on all the illegal monies floating around out there. You want to spend big - Great - We need the extra money. You want to be conservative - Great too! We can use some extra cash in the banks.

Reform the Credit Industry - 29.9 % interest on Credit Card Debt is insane. And it's the people that have less working capital that are sucked into that vortex. Really stinks!!

Why do you think Rapid Refunds do so well in repressed areas!?? More crime at hand!!

Why don't they reach into their own pockets and reduce some of the incredible perks that they get? I have not checked in a while but - Do Senators and Legislators still retire at FULL Pay? With GOLD BC/BS packages? Why don't they contribute to SS and Medicare? Things like this drive me nuts!! PLEASE CORRECT ME IF I AM WRONG!!

[Burke]

If the rate is low enough, no one needs deductions. Unfortunately, I hold no hope of anything like this ever passing Congress. Are you kidding? Every constituency under the sun will be lobbying for their particular special interest. Mortgage interest gone? Housing will collapse. (As if it hasn't already for issues totally unrelated to taxes.) The majority of taxpayers that file do not itemize, so this is immaterial to them. Mtge int, real estate taxes, state taxes, and charitable contributions all benefit proportionately the more well-off taxpayer in higher brackets. Changing deductions to credits does not solve any of this. I have no problem with the elimination of second home interest deduction. Or equity line on a primary residence not used to buy, build or improve a home. Or earned income credit. That rightfully belongs in the welfare system. Whatcha wanna bet we have another four Tax Bill Reform Acts this year? Seems to be the norm. We will never be out of work.

[taxmandan]

Burke has it right. Several years ago some bean counters calculated that elimination of the mortgage interest deduction would cause an immediate 20-25% devaluation of all homes. With the second dip in the home market in progress now, the last thing our economy needs is even more loss of value in the most important asset most middle income Americans have in their portfolio.

Did they say anything about eliminating the EITC, child tax credit or child care credit? Those refundable tax credits are why 50% of filers don't even pay any taxes. A 12% tax without credits would sure hit the poor hard and then there would be blood in the streets.