by Ken Rankin
Washington — Leaders of the accounting profession who have been clamoring for the simplification of the nation’s overly complex tax laws found a new champion on Capitol Hill as the 2004 filing season drew to a close.
In a move aimed at pushing tax code simplification to the top of the congressional priority list, Rep. Amo Houghton, R-N.Y., introduced a package of nine separate proposals designed to streamline a number of the most complicated aspects of the U.S. tax system.
At the same time, Houghton, 77, who recently announced his decision not to seek a 10th term, also advanced a House resolution that would require Congress to include a “simplification title” as part of any new tax measure.
Taking a page from the American Institute of CPAs’ legislative hymn book, the New York Republican warned that failure to simplify the federal tax code will undermine voluntary compliance by millions of taxpaying Americans. “As we approach the deadline of April 15, taxpayers once again come face to face with the task of voluntarily — and I emphasize voluntarily — complying with filing their individual tax returns,” Houghton told Congress. “If our system becomes too complex for the ordinary citizen, then noncompliance will accelerate.”
A key element of Houghton’s new legislative package is repeal of the alternative minimum tax — a step that he described as “at the top of about everybody’s list of must-do tax legislation.” The proposal would cushion the revenue loss from AMT repeal by adjusting the AMT exemption to “substantially reduce the number of taxpayers subject to AMT over the next 10 years.”
The tax would then be repealed altogether after 2013.
Other ingredients in Houghton’s tax simplification master plan include:
- The Child Definition Simplification Act of 2004, a measure that would provide a uniform definition of a child for tax purposes based on residence, relationship and the age of the child;
- The Filing Status Simplification Act of 2004, legislation to eliminate confusion about “Head of Household” filing status by changing the terminology to “Single Parent or Guardian” filing status;
- The Home Mortgage Tax Simplification Act of 2004, a proposal that would allow taxpayers to fully deduct points paid on a home mortgaging refinancing in the year in which the expense is incurred;
- The Taxation of Minor Children Simplification Act of 2004, legislation eliminating the current restrictions on adding a minor child’s income to the parent’s return (under Houghton’s plan, a parent could freely elect to include the income of a child under 14 on his or her own tax return);
- The Education Tax Credit Simplification Act of 2004, a measure that would merge the HOPE and Lifetime Learning Credits — educational subsidies that, said Houghton, “serve nearly identical purposes but have different rules.” The proposal would provide a credit for one-half of the first $3,000 of post-secondary education expenses. The new credit would apply on a per-child basis and would not be limited to the first two years of post-secondary education;
- The Small Business Tax Modernization Act of 2004, a plan to combine the benefits of Subchapter S (S corporations) and Subchapter K (partnerships) of the Internal Revenue Code in a single, unified pass-through entity regime based on Subchapter K;
- The Personal Holding Company Tax Repeal Act of 2004, legislation that Houghton says would eliminate an “outdated” provision that “has been eclipsed by subsequent changes to the tax code;” and,
- The Small Business Law Tax Conformity Act of 2004, a laundry list of changes to bring the code in step with evolving state business laws, including a revised definition of earnings from self-employment to exclude the portion of a partner’s distributive share that is attributable to capital.
If these simplification proposals — which affect millions of taxpayers — are enacted this year, filing tax returns next year will be simpler and less time-consuming,” Houghton said.A fixture of upstate New York politics since 1986, Houghton is a former chief executive of glass and cookware maker Corning Inc.
