TAX REFORM - A BETTER WAY

Now that the Republicans have been unable to accomplish anything with health care they are moving on to tax reform.

 

I firmly believe that the current “mucking fess” that is the US Tax Code should be completely shredded and we should start from scratch.  And I firmly believe that this new Tax Code must not be used for social engineering, to redistribute income or wealth, or to deliver social welfare and other government benefits.

 

One of the biggest problems with the current system, and a large source of its complexity, is the erroneous use of the tax return to deliver government benefits.  The Internal Revenue Service, and the tax professional community, should not be required to act as Social Workers and administer and verify government program benefit payments.  This practice is not only inappropriate, but it also invites and encourages tax fraud. 

 

I am not saying the government shouldn’t provide financial assistance to the working poor and college students, provide encouragements for purchasing health insurance, making energy-saving purchases and improvements, and other ‘worthy’ actions.  What I am saying is that such assistance and encouragements should not be distributed via the Form 1040.

 

The benefits provided by the Earned Income Tax Credit and the refundable Child Tax Credit should be distributed via existing federal welfare programs for Aid to Families with Dependent Children. The benefits provided by the education tax credits and deduction for tuition and fees should be distributed via existing federal programs for providing direct student financial aid. The benefits provided by the Premium Tax Credit, the energy credits, and other such personal and business credits should be distributed via direct discount payments to the appropriate vendors or direct rebate programs, similar to the successful Cash for Clunkers program of a few years ago, funded by the budget of the appropriate Cabinet departments.

 

Distributing the benefits in this manner is much better than the current method for many reasons:

 

1. It would be easier for the government to verify that the recipient of the subsidy, discount or rebate actually qualified for the money, greatly reducing fraud. And tax preparers, and the IRS, would no longer need to take on the added responsibility of having to verify that a person qualifies for government benefits.

 

2. The qualifying individuals would get the money at the “point of purchase,” when it is really needed, and not have to go “out of pocket” up front and wait to be reimbursed when they file their tax return.

 

3. We would be able to calculate the true income tax burden of individuals. Many of the current “47 percent” would still be receiving government benefits, but it would not be done through the income tax system, so they would actually be paying federal income tax.

 

4. We could measure the true cost of education, housing, health, energy and welfare programs in the federal budget because benefit payments would be properly allocated to the appropriate departments.

 

So what do you think?

FYI - I have written a "review" of the 36th annual National Conference of the National Association of Tax Professionals at the Marriott Wardman Park in Washington DC. that will appear in 2 parts at THE WANDERING TAX PRO.  Part 1 appears today and Part 2 will be posted on Wednesday..

 

TAFN

 

 

I have been preparing 1040s since 1972. Over the years I have developed a collection of forms, schedules and worksheets that have proven very helpful in my practice. 

 

Some of my forms are given to clients to help them provide me with the information I need to properly prepare their returns. Some are used as “memos” to the client’s copy and my office file copy to back-up items reported on the returns. Others are used as attachments to the returns.

 

I offer this compilation to you for only $7.95!

 

Click below for more information-

http://robertdflach.blogspot.com/p/blog-page.html