[Homestead] Tax Simplification---Su-rr-rre

tvoivozhd tvoivozd at infionline.net
Thu Sep 16 14:59:08 EDT 2004

TAX CODE SO FAR---"Dont EVER listen to what I say, watch whatI I do."

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Last update: September 10, 2004 at 6:45 AM

  Editorial: Tax simplification/Whiplash at the White House

September 10, 2004 ED0910

Speaking at the Republican National Convention last week, President Bush 
promised to lead a bipartisan campaign for tax simplification if he wins 
a second term in office. This is a terrific idea: A simpler tax code 
would reduce the headaches of April 15 for millions of individual 
taxpayers and let market forces, rather than tax loopholes, guide the 
decisions of American business.

But it's hard to know why voters should take the president seriously, 
when he has spent the last four years doing exactly the opposite. The 
three large tax bills Bush has pushed through Congress since 2001 have 
cut taxes for most Americans, but they have also added something like 
1,000 pages to the federal tax code and introduced a baffling array of 
phase-ins, phase-outs, sunsets and tax shelters to the Form 1040.

A recent summary by the Congressional Budget Office gives just a few 
examples. If you have children under 17, your tax credit went up last 
year but will go down next year. Unless the children turn 17 during the 
year; then they don't qualify in the first place. If you sold shares in 
a mutual fund, your tax rate went down last year -- but only if the sale 
occurred after May 3 -- and will go up again in 2009. Contemplating 
marriage? Do it this year or wait until 2009, when the standard 
deduction will be higher. But don't get married in between, when the 
standard deduction will be lower. If you have a nest egg to leave your 
children, make sure you live until 2010, when the federal inheritance 
tax disappears. But don't wait too long to die: the tax pops back into 
effect in 2011, using the same provisions that governed estates in 2002. 
And so on.

"We've just about stopped trying to give our clients estate-planning 
advice," says one Minneapolis accountant. "We used to memorize major new 
provisions of tax law," says another. "Now we have to rely on the computer."

This sort of complexity might be considered a fair trade-off for lower 
taxes. But Bush and Congress' Republican tax writers could have cut 
taxes and simplified the tax code simultaneously by merely removing 
loopholes and cutting marginal rates. Instead, they added new breaks for 
capital gains, dividend income, business depreciation, certain married 
couples, families with children of a certain age, college expenses when 
paid for out of special accounts and certain forms of health insurance. 
Any of these might be worthy goals; Congress for years has used the tax 
code to reward certain kinds of behavior. But they have nothing to do 
with tax simplification.

We hope the president meant what he said in New York last week. It would 
be good for the economy and good for anyone who has wrestled with a Form 
1040. But then simplifying the tax code would mean jettisoning dozens of 
special new provisions that Bush just introduced. Voters might be 
forgiven if the term "flip-flop" comes to mind.

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