Bush's Tax Panel - Why do they Hate Americans?

[Ioo]

http://www.bushsamerica.com/index.php/2005/11/01/bush_s_tax_panel_why_do_they_hate_americ

President Bush's tax-reform panel submits two proposals that would alter the federal tax code. One of them would, like most things this administration does, will unfairly affect the middle-class, and favor the rich in ways they only dream of.

From CNN Money...My Comments

===Reduce investment taxes===

In the panel's first proposal, focused on simplifying the tax code, dividends from domestic earnings would be tax-free as would 75 percent of the capital gains you receive. The other 25 percent of gains would be subject to your marginal (or top) tax rate. This is a great windfall for the rich, they make a lot of cash via investments, and now 75% of the money they make will not be taxed at all! Hazaa for the Rich!

The net effect is that your capital gains would be taxed at rates between 3.75 percent and 8.25 percent, depending on your tax bracket.

Under the existing code, dividends and long-term capital gains are taxed at 15 percent or less, but they are set to go higher after 2008.

Interest on everything except tax-exempt municipal bonds would continue to be taxed at individual rates as is the case in the existing tax code.

In the panel's second proposal, dividends, capital gains and interest would all be taxed at 15 percent.

===Alter homeowners' tax breaks===

The panel recommended lowering the mortgage-interest cap, which is the amount of a loan on which homeowners would receive a tax break for interest paid, from $1 million to the average regional housing price in the range of $227,000 to $412,000. In places like where I live, an ave 5 bedroom is in the $700,000 each, so this is going to hurt so many in the lower middle, and middle-class, ah, but the Bush adminsitration hates them, and chances are, that is YOU

The deduction would be converted to a credit equal to 15 percent of interest paid on mortgages up to the interest cap. A credit is a dollar-for-dollar reduction of the taxes you owe, while a deduction only reduces your taxable income by a percentage equal to your top tax rate. Deductions benefit high-income taxpayers the most and are limited to those taxpayers who itemize on the federal tax returns.

Generally speaking, the higher your mortgage loan and the higher your tax bracket, the more likely it is that you'll see less of a tax break than you would under the current system. That's because under the current system those in the highest tax brackets benefit most from the deduction.

===Reduce the marriage penalty===

All tax brackets, family credits and taxation of Social Security benefits for couples would be double those of individuals.

Under the current system, some two-earner married couples filing jointly end up paying more in taxes than two single taxpayers with the same income.

===Reduce tax breaks on employer-provided health insurance===

When you work for a company, your employer typically foots a large portion of your health-insurance premiums. That money, which is not reported on your W2, is tax-free to you.

The panel recommended capping the amount of tax-free money that may be used to pay for health insurance to $5,000 for single coverage or $11,500 for family coverage.

===Repeal the federal deduction of the state and local tax deductions===

Under the proposals, taxpayers would no longer be allowed to deduct the state and local taxes they pay on wage income, investment income and property. So all that money you get to write off for your state income taxes and so on, gone! you now have to pay income tax on the money you used to pay your state taxes.

Former Senator John Breaux of Louisiana, who is the panel's vice chair, on CNBC Tuesday morning explained part of the panel's reasoning this way: "If people in California want to pay extra taxes to have their trash picked up, people in Texas shouldn't have to subsidize it."

===Reduce the number of tax brackets===

Under the panel's first proposal, which is a streamlined version of the current income tax, the number of tax brackets would be reduced from 6 to 4. They would be: 15 percent, 25 percent, 30 percent and 33 percent.

Under their second proposal, which combines the income tax with a progressive consumption tax, there would be only three tax brackets: 15 percent, 25 percent and 30 percent.
Reduce and simplify tax-advantaged savings accounts

You might be forgiven for not being able to keep straight the differences between several types of IRAs, various types of 401(k)s, to say nothing of HSAs, FSAs, Coverdells and 529s.

The tax-reform panel is proposing to consolidate defined-contribution plans -- e.g. 401(k)s, 403(b)s, 457s -- into one Save at Work Account with simple rules and an annual contribution limit of $10,000.

They also propose replacing all types of IRAs with one Save for Retirement Account that would be available to all taxpayers. You could contribute up to $10,000 a year with after-tax dollars that would grow tax-free. Currently, your income and your workplace savings options determine whether you're eligible to contribute to different types of IRAs and whether your contributions can be deductible or whether your earnings grow tax-free.

Education savings plans like 529s and health savings plans like flexible spending accounts (FSAs) would all be consolidated into one Save for Family Account. This account, which would be available to all taxpayers, could also be used for new home and retirement savings as well. You could contribute up to $10,000 a year with after-tax dollars that would grow tax-free.

===Simplify tax filing===

The panel proposes creating a 1040 Simple form that could fit on both sides of a 4 X 6-inch index card. The number of lines would be reduced from 75 on the current form to 32 on the proposed form. It would also reduce the number of schedules, forms and worksheets from 52 to 10.

The panel also proposes creating two new credits: one for family, which would replace the standard deduction, the personal exemption, the child tax credit and the head of household filing status and tax bracket; and one for work, which would consolidate the earned income tax credit and refundable child tax credit.

[MadisonProgressive]

1. That alone would be grounds for revolution!

[Ioo]

2. kick - because it needs to be known!