Thursday, September 20, 2007

Evan Bayh makes a REALLY dumb proposal

Please read this press release from the Evan Bayh campaign (Hat tip to John Good):
<http://www.insideindianabusiness.com/newsitem.asp?ID=25540#middle>

This press release demonstrates why our tax code is so screwed up. The tax code gets larger and more complicated each and every year because of politicians who want to "appeal" to voters and pass legislation that just makes no sense.

This latest example from Senator Bayh is indicative of this.

Before I tear it apart; let me explain a little bit about the "standard" deduction and "itemized" deductions. All of us who file Federal Income Tax returns will either claim a "standard deduction" or we will "itemize" our deductions.

To make a long story short; you can take the "standard deduction" no matter what; however, if you look through your receipts each year and you have incurred more allowed expenses then the standard deduction then you can itemize your deductions.

So for your 2006 taxes the "standard deduction" for a married couple was $10,300. So in 2006 you could deduct $10,300 from your income OR if you incurred more expenses that count as itemized deductions you could "itemize" your deductions and take subtract the larger amount from your taxable income.

The largest three expenses US families incur that count as itemized deductions are mortgage interest, property taxes, and medical expenses.

Senator Bayh's proposal is that those people who take the "standard" deduction next year can also deduct from their income the amount of property taxes they pay as ANOTHER category of standard deduction.

This will add another line to the tax forms and make your taxes a little more complicated.

There is a MUCH EASIER way to handle this and Senator Bayh should have discussed this with someone who has filled out a tax return in the past. I would think someone on his staff has filled out a tax return or that one of the other sponsors of the bill has possibly filed an actual tax return.

Senator Bayh could accomplish his intent by just raising the standard deduction. This would NOT make the tax code any more complicated and would serve the same purpose because Property Taxes paid are ALREADY one of the main items you consider when determining whether you take the standard deduction or itemize you deductions.

Four Indiana Congressman have already decided to support this silly proposal. Republican Dan Burton and Democrats Donelly, Hill and Ellsworth.

Where do we find these people who are elected to public office?

Good Grief

Mike Sylvester, CPA

3 comments:

Tim Zank said...

Mike,Mike,Mike....Just raising the amount of the standard deduction has no "sizzle". It's boring. Now CREATING a new tax break, that is headline worthy! It's got some "sizzle"!!

Jeff Pruitt said...

Mike,

When I first heard this proposal it seemed to make sense but I can see your point as well. After we discussed the issue tonight I think you're right that this is a needless addition to the tax code that can simply be chalked up to pandering...

Anonymous said...

Tim is on the right track. Not only can everyone see what the extra dealie is, they will specifically think of "future presidential candidate" Bayh as the fine politician who gave them more money.

I still think we will eventually get to the simplified tax code of Line 1, What is your Income, and Line 2, Send it in....
Kent