The President's Advisory Panel on Federal Tax Reform submitted two proposals to the Treasury Department after months of work -- the first pushing for major simplification of the current income tax system and a second recommending changes for businesses that lead to an indirect tax on consumption.
The proposals were submitted to Treasury Secretary John Snow and the tax-writing House Ways and Means and Senate Finance Committees have pledged to also examine the recommendations.
"Our tax code is rewritten so often that it should be drafted in pencil," the panel wrote in the letter that accompanied the report. "Each year, the tax code is adjusted to meet multiple policy goals -- some are broadly shared, but many are not. Myriad tax deductions, credits, exemptions and other preferences may be a practical way to get policy enacted, but it is a poor way to write a tax code."
The full report is available at http://www.taxreformpanel.gov/ .
Under the panel's plan, most of those deductions, credits, exemptions and other preferences would be scrapped in a plan to streamline the income tax and simplify paperwork.
Among other changes, the panel suggested that:
- The home mortgage interest deduction become a credit equal to 15 percent of mortgage interest paid and the $1 million limit on mortgages eligible for the tax break would drop to the average regional price of housing, ranging from $227,000 to $412,000;
- Taxpayers be allowed to purchase health insurance using untaxed money up to the amount of the average premium, about $5,000 for an individual and $11,500 for a family;
- The elimination of the alternative minimum tax, as well as federal deductions and credits for mortgage interest, state and local taxes and education; and,
- Under one plan, individuals would pay no tax on dividends paid by companies, while excluding 75 percent of their capital gains from taxation. Under the second plan, all investment income would be taxed at a flat 15 percent.
Established by President Bush in January, the bipartisan panel was asked to ensure that its recommendations aimed at making the country's tax system simpler, fairer and more oriented to economic growth, all while remaining revenue-neutral. The panel heard from nearly 100 witnesses and received thousands of written comments before it began structuring its report last month.
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access