Print

 

PILLA TALKS TAXES - Featured Article
_________________________________________ 

THE REPUBLICAN TAX PLAN

"Fixing Our Broken Code"

The Trump Administration, the Chairman of the House Committee on Ways and Means, and the Chairman of the Senate Committee on Finance (and their staffs) all worked together to develop a framework for tax reform. On September 27, 2017, the Republican leadership in Washington released a position paper setting out the essence of its tax reform plan. The paper is called, Unified Framework for Fixing Our Broken Tax Code.” Quoting the president, the paper states that it’s time for Congress to provide a level playing field for workers…and to put more money into the pockets of everyday hardworking people.” 

The Unified Framework (UF) claims to track the four principles for tax reform laid out by President Trump. They are: 

       ·         Simplify the tax code so it’s easier to understand,  

       ·         Allow workers to keep more of the money they earn,

       ·         Attract jobs to the United States by leveling the playing field for American businesses and workers, and

       ·         Bring trillions of dollars currently held offshore back to the United States. 

The UF claims that it will support economic growth, provide relief to middle-class families, and protect jobs and our workers. It claims to broaden the tax base, close loopholes and grow the economy. The key elements of the UF plan, according to the authors, include: 

·       Tax relief for middle-class families,

·        The simplicity of a “postcard” filing,  system for most Americans,

·        Tax relief for small businesses,

·        Ending incentives to ship jobs and capital overseas, and

·      Broadening the tax base and providing greater fairness for all Americans. 

To answer the question of whether the details of the framework might actually accomplish the goals expressed, let’s examine the key elements of the plan.
 

An Expanded Zero Bracket 

The UF’s chief objective—“keeping more money in the pockets of the middle class”—is addressed by the proposal to increase the so-called zero bracket” income amount. The zero bracket” is a colloquial phrase used to describe the amount of money that one can earn before incurring any income tax liability at all. The UF proposes to roughly double” the standard deductions for both married taxpayers filing jointly (MFJ) and single filers. The numbers would go to: 

            $24,000 for MFJ, and

            $12,000 for single filers. 

On the face of things, this seems attractive because, as claimed, these numbers about double the standard deduction for people in these filing categories. But the analysis does not end there. While nearly doubling the standard deduction, the plan would also eliminate entirely the personal exemptions for both a taxpayer and his spouse. After considering the elimination of personal exemptions, there is no way the amount of exempt income is about doubled” under this plan. 

Under current law, the zero bracket” (though not an official term since its repeal in 1986), is the amount of the standard deduction available to people, depending on their filing status. The amount of income currently exempt from taxes is the combination of the standard deduction together with personal exemptions. If one has income less than the sum of his standard deduction and personal exemptions, there is no requirement to even file a tax return except to seek a refund of withheld taxes. On the tax return, it looks like this for a MFJ couple in 2017:

 

            Standard deduction:                        $12,700

            Personal exemptions

                          (2 at $4,050)                      $  8,100

 

            Total exempt income                       $20,800

 

As you can see, it is disingenuous at best to say that upping the standard deduction to $24,000 about doubles” the zero bracket when the UF would take away $8,100 of exemptions with the other hand. The increase in exempt income is therefore merely 13%—a long way from double. 

And while I agree that more income is nevertheless exempt under the plan, that too may be deceptive depending on all the facts and circumstances of a given case. For example, the UF not only proposes to eliminate the exemption for the primary taxpayers (whether single or MFJ), it would eliminate all dependent exemptions for kids. For example, if MFJ taxpayers have two minor children, they are currently entitled to exempt an additional $8,100 in income ($4,050 for each of the two kids), bringing their effective exempt income to $28,900, much more than the proposed $24,000 exemption. 

The other side of that coin is that the plan enhances the current tax breaks for kids.   

 

This is a portion of an article taken from October 2017 Special Report issue of "Pilla Talks Taxes."  
Newsletter subscribers can read and download the entire article by logging in at 
http://taxhelponline.com/subscriber-login.html

      

LOOKING TO STAY CURRENT ON THE LATEST TAX CHANGES?

Dan Pilla' monthly newsletter, Pilla Talks Taxes, features news stories and developments in federal taxes that effect your pocket book. Each information packed issue shows you how to use little known strategies to cut your taxes, protect yourself from the IRS, exercise important taxpayers' rights and keeps you up to date on the latest trends in Washington on the important subjects of taxes and your rights. You can't afford to miss a single issue!

An email address is needed to recieve this newsletter.  MORE INFO

10 issues per year. $99.00 per yr Order Now!

ARTICLES FOUND IN THE LATEST 

PILLA TALKS TAXES ISSUE:

 

THE REPUBLICAN TAX PLAN
       "Fixing Our Broken Tax Code" 

 

MY ANALYSIS OF REAL TAX REFORM
       The Patriot's Toolbox - Fourth Edition

 

PATRIOTISM FOR BUSINESS INVESTING, NOT PAYING TAXES
       -by Tom Giovanetti, President, Institute for Policy Innovation 

  

WHAT THE COURTS SAY ABOUT A "PATRIOTIC DUTY" TO PAY TAXES

 

 

 

Missed a prior featured article?

Here are links to some of the favorites:

FIVE THINGS EVERY CITIZEN
NEEDS TO KNOW ABOUT IRS CONTACTS

 

LEVY OF SOCIAL SECURITY BENEFITS

 

HOW LONG DO I KEEP TAX RECORDS?

 

CHANGE IN POLICY ON
ENFORCEMENT OF STRUCTURING LAW

Laws Pertaining to Moving Your Money
from Account to Account

 

WHAT EVERY CITIZEN NEEDS TO KNOW 
ABOUT RETIREMENT FUND DISTRIBUTIONS

The Tax Consequences of Taking Your 401(k) or IRA  

 

"I'M FROM THE IRS... -And You're Going to Jail!"

 

PASSPORTS AND THE IRS
  They Have More in Common Than You Might Think

 

AVOIDING PENALTIES UNDER OBAMACARE

 



MASTER INDEX OF PILLA TALKS TAXES

RESEARCH REPORTS, ARTICLES

Looking for a specific issue or article? 
Single Issues available for download, $15.95 per issue.

Contact us to order. 1-800-553-6458