President Bush has asked for a simpler tax process and set up a panel to make recommendations. While the report is not final, the recommendations that the panel is considering have been reported and the panel’s final report will be delivered to Treasury Secretary John Snow in about two weeks. While it isn’t set in stone, it will carry considerable weight in the Bush administration. It will also be heavily lobbied against by groups whose tax breaks are being threatened. Here is a summary of some of the tax proposals likely to make it into the final draft:
The home mortgage tax deduction will likely be lowered.
The amount of tax-free health insurance contributions your employer makes on your behalf may be lowered.
In order to encourage and increase savings, there will be some type of “savers’ credit.”
There would be a “family credit” which will replace the filing status and number of exemption. The credit for a child would increase to $1,500 from $1,000 with the age limit being raised from the current 16 years of age.
The current deduction for student loan interest would be eliminated. The savings would be either incorporated into the proposed family and savers’ credits.
Dividends from a corporation’s domestic earnings would be tax-free. All other dividends would taxed at the taxpayer’s ordinary rate, rather than the current 15%.
The filing for small businesses and the self-employed would be simplified.
The Social Security benefits deduction would be made easier
All filers could make deductions for charitable contributions and health insurance premiums. Currently these are only available to those who itemize their deductions.
Deductions for state and local taxes would be eliminated.