The pro Red state anti Blue state tax reform plan.

[techs]

http://www.taxreformpanel.gov/

The two items of most interest are the elimination of the deduction for the state and local taxes an individual pays and the elimination of the deduction for mortgages on homes over 325,000 dollars.

Of course the Blue states in general have higher taxes and wages. They are already supporting the Red states by paying far more in taxes than they receive back. Now the Bush appointed panel wants to increase the amount of taxes they pay.

In the Blue states with its higher wages homes are more expensive. In fact in NY City you probably can't buy a home for less than 325,000. While many nice homes in the Red states cost under 325,000.

Not only does this tax plan hurt the Blue states but it seems designed to promote flight to Red states. Where wages and taxes are lower.

 

[Engineer]

An interesting side to this is that you currently can't itemize after a certain point ($145,000 IIRC), so this would take away the deductions for those items for those in the $145,000 and down category (middle class down). The reform, IIRC, would also remove (or change) the Alternative Minimum Tax which would seem to be on the upper middle and upper classes. This would seem to be a shift from the upper/upper-middle classes to the middle/lower classes in taxation.

Not arguing whether it's wrong or right, just an observation.

 

[charrison]

This tax reform was about reducing complexity, not about reducing taxes. Those that pay alot today will contue to pay alot. The wealthy areas are going to trade deducations for the removal of amt, lower marginal rates and reduced complexity.


You do realize the irs is currently in the 4th attempt to write software to manage the income tax. The first 3 were complete failure and I am not sure the 4th is going much better.

 

[Engineer]

Originally posted by: charrison
This tax reform was about reducing complexity, not about reducing taxes. Those that pay alot today will contue to pay alot. The wealthy areas are going to trade deducations for the removal of amt, lower marginal rates and reduced complexity.

What deductions are being given up by the wealthy? Itemization is only for those at $145,000 or lower, IIRC, which would govern the state and local income tax deductions as well as home mortgage interest deduction. Removing the 10% tax bracket, without pushing the 15% bracket out farther, will increase the % of tax "the most" for what group(s)?

While it's billed as a "complexity" issue, it's going to push tax burden down the chain, unless deductions that aren't common are removed or much lower marginal rates or marginal changeover points (15% limit..25% limit...28% limit...etc)are adjusted.

 

[charrison]

Originally posted by: Engineer
An interesting side to this is that you currently can't itemize after a certain point ($145,000 IIRC), so this would take away the deductions for those items for those in the $145,000 and down category (middle class down). The reform, IIRC, would also remove (or change) the Alternative Minimum Tax which would seem to be on the upper middle and upper classes. This would seem to be a shift from the upper/upper-middle classes to the middle/lower classes in taxation.

Not arguing whether it's wrong or right, just an observation.

The AMT was originally planned to catch 150 wealthy low tax payers. However it was never indexed to inflation. Today AMT affects 10s of millions tax payers and is steadly making its way in the middle class. Leaving AMT in place would surely affect large portions of the middle class.

 

[charrison]

Originally posted by: Engineer

Originally posted by: charrison
This tax reform was about reducing complexity, not about reducing taxes. Those that pay alot today will contue to pay alot. The wealthy areas are going to trade deducations for the removal of amt, lower marginal rates and reduced complexity.

What deductions are being given up by the wealthy? Itemization is only for those at $145,000 or lower, IIRC, which would govern the state and local income tax deductions as well as home mortgage interest deduction. Removing the 10% tax bracket, without pushing the 15% bracket out farther, will increase the % of tax "the most" for what group(s)?

While it's billed as a "complexity" issue, it's going to push tax burden down the chain, unless deductions that aren't common are removed or much lower marginal rates or marginal changeover points (15% limit..25% limit...28% limit...etc)are adjusted.

There are deductions scattered all over the tax code(hybrid cars, running a business from home, child care,...). Remove them all and lower tax rates and less complexity. A tax with a broader base and lower rates is how it is supposed to work.

 

[imported_tss4]

Originally posted by: charrison

Originally posted by: Engineer

Originally posted by: charrison
This tax reform was about reducing complexity, not about reducing taxes. Those that pay alot today will contue to pay alot. The wealthy areas are going to trade deducations for the removal of amt, lower marginal rates and reduced complexity.

What deductions are being given up by the wealthy? Itemization is only for those at $145,000 or lower, IIRC, which would govern the state and local income tax deductions as well as home mortgage interest deduction. Removing the 10% tax bracket, without pushing the 15% bracket out farther, will increase the % of tax "the most" for what group(s)?

While it's billed as a "complexity" issue, it's going to push tax burden down the chain, unless deductions that aren't common are removed or much lower marginal rates or marginal changeover points (15% limit..25% limit...28% limit...etc)are adjusted.

There are deductions scattered all over the tax code(hybrid cars, running a business from home, child care,...). Remove them all and lower tax rates and less complexity. A tax with a broader base and lower rates is how it is supposed to work.

So why weren't any of these deductions targetted for removal?

 

[charrison]

Originally posted by: tss4

Originally posted by: charrison

Originally posted by: Engineer

Originally posted by: charrison
This tax reform was about reducing complexity, not about reducing taxes. Those that pay alot today will contue to pay alot. The wealthy areas are going to trade deducations for the removal of amt, lower marginal rates and reduced complexity.

What deductions are being given up by the wealthy? Itemization is only for those at $145,000 or lower, IIRC, which would govern the state and local income tax deductions as well as home mortgage interest deduction. Removing the 10% tax bracket, without pushing the 15% bracket out farther, will increase the % of tax "the most" for what group(s)?

While it's billed as a "complexity" issue, it's going to push tax burden down the chain, unless deductions that aren't common are removed or much lower marginal rates or marginal changeover points (15% limit..25% limit...28% limit...etc)are adjusted.

There are deductions scattered all over the tax code(hybrid cars, running a business from home, child care,...). Remove them all and lower tax rates and less complexity. A tax with a broader base and lower rates is how it is supposed to work.

So why weren't any of these deductions targetted for removal?

I assume they are. However the mortgage deduction affect alot of people(70% homeownership), so it will be far more difficult to remove