In light of the revelation of the
dueling GOP tax Acts I have created my own Flach Tax Plan and a new, much
simpler Form 1040.
My new simpler Form 1040 that follows
was not created from an economic
point of view – how much tax is collected – but from the point of view of simplicity and fairness.
I have actually incorporated some of
the GOP proposals in my plan. But it
also contains some unique concepts –
* There is only one tax rate schedule for all taxpayers, regardless of filing
status. The Head of Household filing
status is gone. Married taxpayers can
elect to file separately on one
return or to file separately on separate returns – and a married person filing
separately is treated exactly the same as a Single filer. The method for calculating the tax liability
of married couples filing a joint return does away with the marriage penalty.
* No
deduction would be allowed for any business activity on any tax return for
the depreciation of real estate or capital improvements thereto.
* The delivery of government social
welfare and other program benefits are totally
removed from the Tax Code. There is
no Earned Income Credit, refundable Child Tax Credit, deductions or credits for
qualified post-secondary education expenses, or Premium Tax Credit on my new
Form 1040. I have not done away with
these benefits; they are distributed via more “normal” methods.
* I replace IRA, HSA, MSA, ESA, and Section
529 accounts with an all-inclusive USA (Universal Savings Account). All taxpayers, without exception, can
contribute up to $10,000 per year.
Distributions
made before age 62 for education and medical expenses or to purchase a first
home (only one first home per lifetime) would be considered to be qualified
withdrawals. There would be no penalty
on non-qualified withdrawals after age 59½, but earnings would be taxed. All withdrawals after age 62 would be
considered to be qualified.
I also replace all employer and
self-employed retirement plans with a RSA (Retirement Savings Account). Employers can elect to contribute up to 25%
of wages annually, all employees can elect contribute up to $20,000 of wages
annually. There would be no requirements
for either to contribute. Self-employed
taxpayers can contribute, and deduct, up to 20% of adjusted net self-employment
income.
There would be “traditional” (for the
USA fully deductible and no tax on earnings for qualitied withdrawals and for
the RSA employee contributions would be “pre-tax” on the W-2) and ROTH
(contributions non-deductible – qualified withdrawals totally tax free) options
for both accounts.
* Contributions to an RSA by a
self-employed taxpayer and the deduction for the health insurance premiums paid
by a self-employed taxpayer would reduce
the net earnings from self-employment that is subject to the self-employment
tax.
* Social Security and equivalent
Railroad Retirement benefits would be taxed the same as regular employer
pensions. Employee contributions would
be recovered by amortizing them over the taxpayer’s life using the, what else,
“Simplified Method” to determine the taxable amount of the benefits received.
* And perhaps most controversial - no charitable deduction
would be allowed for contributions to a church or religious organization for
religious activity.
Non-religious social and community action programs (soup kitchens,
homeless and domestic violence victim shelters, youth centers, day care
centers, etc) run by individual churches and religious groups would need to
separately organize and request non-profit status to allow contributions to be
deductible. Permitting a deduction for
contributions to churches and religious organizations for religious activity
results in the government in effect subsidizing religious activity, which, in
my opinion, is a violation of the separation of Church and State.
Click HERE to download my report A NEW
FORM 1040: TAX REFORM PROPOSALS FROM A TAX PROFESSIONAL.
As always, your thoughts and comments
on my new Form 1040 are welcomed. And
you are welcome to share the link with, or download and copy the report to
distribute to, friends, family, co-workers, and colleagues.
TAFN
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