Question Of The Month

November 26, 2005

Q: Would you support limiting or abolishing popular federal tax breaks - such as the home mortgage interest deduction and the deduction for state and local taxes paid - to simplify the tax code and help trim the federal deficit?

Tax `simplification' could be very costly

Federal tax reform is long overdue.

According to the President's Advisory Panel on Tax Reform, since the 1986 tax reform law there have been almost 15,000 changes in the federal tax code.

Nearly $150 billion is spent each year by households and businesses and the federal government to comply with and enforce the present code.

The current tax code is so confusing that 2 million taxpayers collectively paid more than $1 billion extra in taxes by making the wrong decision in the basic choice about itemizing or taking the standard deduction.

Instead of an efficient tax system we have a tax code that distorts basic economic decisions, encourages unwise or unproductive investments and induces people to work less, save less and borrow more than they could. By some estimates the waste may be as much as $1 trillion per year.

What the Advisory Panel is proposing is a simple tax form.

The proposed plan would be revenue-neutral. It would replace "deductions" with "tax credits" for family, work and home ownership.

The new credit for home ownership would limit the deduction for home mortgage interest and eliminate the property taxes deduction. Both of these deductions have long been considered "untouchable."

However, it should be noted that according to the panel more than 70 percent of taxpayers did not itemize in 2002. Furthermore, in 2004, 55 percent of the home mortgage interest deduction money went to 12 percent of taxpayers with cash income of $100,000 or more

In view of these facts, together with the lower tax rate and elimination of the alternative minimum tax that are part of the panel's proposals, I am persuaded that the proposals are advantageous for the average taxpayer and would enable a tremendous saving in time and money for our economy.

Benedict J. Frederick Jr.

Pasadena

Given the proclivities of Congress, there is no way I would support elimination of the federal tax deductions for mortgage interest or state tax paid.

Before I would allow the elected spendthrifts in the U.S. Congress to eliminate two of the major tax deductions the average citizen has, I would want to have "titanium-clad" guarantees that other taxes will be, and will remain, commensurately reduced. And that's very unlikely to happen.

In addition, the profligate pork-barrel spending that dominates each congressional budget cycle would have to be brought to a halt.

Our legislators on a daily basis demonstrate a desire to do no more than to pander to whichever interest group they perceive will best assist their efforts to remain in office.

Quite simply, our legislators cannot be trusted to eliminate the existing tax breaks while ensuring that the overall system is simplified to the benefit of their constituents.

W.C. Harsanyi

Pasadena

Whenever politicians talk about "simplifying the tax code," it is time for the average American taxpayer to scramble for cover.

When Congress finishes with such a bill, the only sure bet is that the tax code will be more complicated than ever, there will be more loopholes for the wealthy than ever, and the average American will face yet another increase in taxes.

Abolishing the mortgage interest deduction or the deductions for state and local taxes would not simplify the tax code. These are among the simplest provisions in the code and cause little consternation for the few of us taxpayers left who still do our own taxes.

For us simple folk, the most complicated part of the tax code is the portion related to the Alternative Minimum Tax (AMT).

Originally intended to prevent the wealthy from avoiding paying their fair share of federal taxes, inflation has transformed the AMT into a bane for the average taxpayer, and this problem affects a greater percentage of Americans every year.

Most of the federal budget goes to the Department of Defense, to Medicare/Medicaid, to Social Security and to interest on the national debt.

To make even a noticeable dent in our huge federal deficit without increasing taxes, we must reduce these expenditures.

The obvious place to begin is to end the war in Iraq, a costly and bloody conflict that has claimed the lives of more than 2,000 U.S. soldiers and countless Iraqi military and civilians.

The administration's real reason for starting this war has yet to be unveiled, yet the war continues to drain our treasury and divide our nation.

Let's end this disastrous exercise in ignorance and stupidity and bring our troops home now.

John Oetting

Columbia

Although I applaud the President's Advisory Panel on Tax Reform and the Senate Finance Committee for trying to simplify the tax system, we need to at least keep the deduction on state and local income taxes, since it prevents the government from possibly confiscating more than 100 percent of our income.

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