Reinvent the Tax Code
With the fiscal cliff looming and tax hikes on the inevitable rise it would seem that the most rational solution would be to revise the tax code rather than raise taxes. Now policymakers are trying to decide on whether or not they should extend 100% of the tax cuts or only 98% for a majority of Americans.
As a result of the fall elections President Obama has been insistent that we should raise taxes on the wealthiest of the American population, or those making $250,000 dollars a year or more. Republicans are completely soured by the idea of breaking their precious “no new tax” pledge to Grover Norquist. Republicans are stuck on the idea that if the wealthy pay a dime more in taxes then they have to they will stall the economy, lay off their employees, and screw the American people over in any way they can. They insist that taking away entitlements from the middle class and poor is the only way to fix this mess…even though the rich pay lower taxes than the middle class and poor and could easily afford it.
Nobody, I mean nobody, Republican or Democrat, is talking about reforming the tax code to make it fairer to the population. I mean a lot of the wealthy exploit loopholes in taxes to negate paying their fair share. This would only seem fair as the tax code is rigged so that only the very wealthiest can take full advantage of the loopholes.
Tax reform is a great option. But with a tax serviced based economy and the entire branch of the IRS being dependent on a complex tax code
Is this the right approach?
There was an attempt to fix all of these loopholes and deductions by implementing the 1986 Tax Reform Act. This act was passed in good faith but it didn’t work. Eventually the tax loopholes and deductions slowly crept in as lobbyists made their way to Capital Hill.
So what if we fixed the tax code by closing loopholes and eliminating deductions we could lower tax rates on the different income brackets. Also we would have a simpler tax code that will make taxes easier to understand and simpler to pay. Also this may encourage businesses to engage in better corporate behavior as they won’t have an incentive to exploit the tax code for their own gain. This will also lead to an overall sense of fairness amongst all individuals.
Wouldn’t this simple solution bypass all of the nagging and stonewalling in congress and make everything a bit easier for all of us? I sure would enjoy it. Wouldn’t you?
Categories: Federal Tax, Income Tax, Tax Law Tags: federal income tax, federal tax, fiscal cliff, income tax, tax code, tax law, tax reform
‘Fiscal Cliff’ talks still uncertain.
It’s less than a month before the ‘fiscal cliff’ but the White House and the Congress are yet to reach a common ground.
Last week, the White House delivered a $1.6 trillion proposal that presses for higher federal tax rates on higher income tax brackets- as well as the power for the President to raise the national debt limit- in an effort to tame the effects of the impending year-end fiscal disaster. Republicans were quick to counter the White House plan with their version of ‘fiscal cliff’ proposal submitted to the Congress on Monday. Republicans strongly oppose federal tax rate increase, and instead aims to avert the effects of tax cut expirations and automatic federal tax rate increases by curbing federal spending on benefit programs such as Medicare and Medicaid.
White House and Republican point persons have been busily running around this week- appearing on interviews to reiterate why or why not federal taxes should increase- but there is still very little progress in the negotiations. Based on the current pace of negotiations, an understanding may not be reached until the day before the ‘fiscal cliff.’
The ‘fiscal cliff’ is the term used to refer to the fiscal crisis to be faced by the US government by the end of 2012 due to the concurrent expiration of federal unemployment benefits and the Bush federal tax cuts, as well as the commencement of the Budget Control Act of 2011. Federal tax rates for payrolls will rise from 4.2 to 6.2 percent and taxpayers will have to pay additional federal taxes for Medicare.
Categories: Federal Tax Tags: buffet rule, federal income tax, federal tax, fiscall cliff, income tax, republican, tax code, tax law, tax reform
Federal Tax Planning for the “Fiscal Cliff”
The American stock market has been going down for several days now since the sprouting of fiscal cliff debates after the election. Proponents argue that, along with less government and federal tax spending, the fiscal cliff will help cut down federal budget deficits by the end of 2012 and early 2013.
However, many critics warn that the expiration of federal tax cuts and the introduction of new federal taxes in 2013 will cause another economic recession in the future.
If the fiscal cliff takes effect, US taxpayers will witness a rise in the federal taxes. For instance, the top federal tax bracket for income will rise from 35 percent to 39.6 percent, while top capital gain rates will rise to 20 percent from the present 15 percent. The federal tax for employee payroll goes back to 6.2 percent as soon as the payroll tax holiday expires by the end of December and dividends will now be taxed as ordinary income. Moreover, estates worth over $1 million will be taxed at 55 percent from the present 35 percent.
With the impending federal tax increases at the turn of the year, there are several federal tax planning strategies to help tax payers cope with the possible federal tax rate changes after the implementation of the fiscal cliff. Investors and taxpayers are advised to take advantage of the federal tax programs before they expire, convert to Roth IRA, invest in municipal bonds, and sell appreciated assets in 2012 in order to avoid federal tax rate gains and Medicare surtax in 2013.
Categories: Federal Tax Tags: federal income tax, federal tax, fiscal cliff, income tax, tax increase, tax law, tax reform