Sunday, October 30, 2005

Advice to the Tax Reform Commission

There are two actions that would reduce the cost of tax preparation and auditing and make the personal income tax more equitable while changing the code very little. This is not to say that other changes are not desirable, but these changes can be made easily without upsetting almost anyone, and therefore are a good place to start.

The table below compiled from IRS data shows that 53 million taxpayers with incomes less that $22,000 could be removed from the tax rolls, reducing tax revenue by only $13 billion out $748 billion. Seven billion of this loss could be recouped by closing the loopholes that people making over ten million a year use to lower their tax rate four points below that of people making half a million. The savings in preparation and auditing costs could easily make up the rest.

Anyone making $22000 or less can hardly meet their everyday expense to hold a job and pay for health care. They shouldn’t have to pay income taxes if they don’t have any income after expenses, when corporations pay taxes only on their net income.

The first thing the commission and the Congress should do is take anyone who is making less than $22,000 a year off the tax rolls and close the loopholes for the multimillionaires so their rates are in line with others making less.

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