Income Tax Simplification Proposals
53 Pages Posted: 24 Feb 2013
Date Written: February 22, 2013
This paper proposes various moves for simplification of the task of computing the tax base under the individual income tax, with a principal view of making the income tax capable of compliance by “ordinary” individuals without the aid of tax preparation software or outside assistance. Another aim of simplification is to render taxpayers’ perception of it as being internally coherent, and not as a Christmas tree showering an array of goodies (and baddies) to the highest (and lowest) bidders. Simplification is offered here as a “good government” project.
Some of the proposals are tied to commonly-circulated “tax reform” proposals, and others are not. The proposals are too numerous to list in this abstract, but include the following: (1) simplifying the computation of taxable income, (2) reconstituting low-income tax credits, (3) eliminating various personal deductions while also eliminating various back-handed itemized deduction cut-down rules, (4) adding various rules for the purpose of eliminating fact-intensive controversies, (5) simplifying accounting for residence-related income production (mainly by eliminating depreciation), (6) eliminating spurious COD income, (7) eliminating the distinction between alimony and child support, (8) simplifying (cash) accounting for small business, (9) mandating GAAP accounting for C corporations, (10) simplifying the income taxation of certain estates, (11) treating all inter vivos trusts as grantor trusts, (12) proposing a portfolio approach to publicly traded investments, (13) proposing a single-rate system for all individual taxpayers, (14) noting various ways of simplifying the capital gains apparatus, (15) taxing all personal injury recoveries, (16) simplifying and rationalizing the law relating to deferred compensation, (17) requiring pass-through taxation of nonpublic business entities, (18) disallowing the interest deduction for C corporations, (19) repealing the E & P apparatus, and (20) eliminating § 911, as well as proposing numerous items of a more technical nature.
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