Federal Income Tax Reform
After I published my first thoughts regarding tax reforms, I received a couple comments disappointed that I had only discussed benefits to business. It seemed to some to neglect the individual. I began there because I would like to put an exclamation point on the President's persistent mantra of jobs, jobs, jobs!!! Corporate tax reform is just the first step to achieving that growth and opening the door to more business investment in the USA, not just in the more lenient countries such as Ireland. We start by encouraging money to return to us. Today, I will talk briefly about individual tax reform.
The current tax code is comprised of 74,608 unreadable and too often undecipherable legalistic pages, or over 10,000 words. Most novels you might read, just for example, run about 200 to 300 pages (62,500 words). This has to change! There are several popular possibilities from Flat Tax to National Sales Tax plans, all of which have some merit but also some detriments, and each runs the risk of rates being raised in the future at the whim of Congress. For personal income tax reform, President Trump seeks to cut taxes and simplify the tax structure by condensing the seven tax brackets we currently have into just three tax brackets. I agree with that approach and would help to push for that plan if momentum in DC lags over the next year. I would like to see the income thresholds for single taxpayers be exactly half of those for married joint filers, thereby eliminating the marriage penalty.
A 3 level plan to consider would be as follows:
12% tax rate for those making:
$ 15,000 to $37,500 for Singles
$ 30,999 to $ 75,000 for Married
25% tax rate for those making:
$ 37,500 to $112,500 for Singles
$ 75,000 to $ 225,000 for Married
33% tax rate for those making:
$112,500 for Singles
$ 225,000 and above for Married
Note that just as the current tax brackets do, these income ranges are referring to taxable income, and the calculation of it (as the administration's website sites) would surely change considerably if President Trump's plan were to be implemented. For one thing, I agree that the standard deduction should double to $15,000 (single) and $30,000 (married), from the current levels of $6,350 and $12,700, respectively, thereby helping lower income workers.
President Trump seeks to expand tax benefits for families, including a larger allowable deduction for child care expenses that could be taken whether a taxpayer itemizes or not, and would also be allowed for up to four children (the current law only allows for two children). President Trump is wise to conduct tax reductions piecemeal. This is a start. We must lower personal income taxes and provide a code actually capable of being understood, not requiring a team of lawyers to sort through.