Tax Reform Part One Leveling The Playing Field If one wants a level playing field let us examine

e how that can be done without too many changes. The tax structure is completely set up for higher income to get more deductions and advantages and for those in the lower strata to get less. The way taxes are levied and structured is completely unfair. If you have a home the mortgage interest is usually most of your payments for the first ten to fifteen years. If you rent, there is no deduction and you are forced to take the standard deduction which doesnt even start to cover all your expenses. When looking at income those who receive incomes from investments or capital gains pay less than anyone else. This division of unearned income and earned income give the wealthy even more of an advantage than anyone else. If we look into corporations, they get to deduct their utilities, insurance, auto expenses, charitable donations (though only a portion) and also get to pass on paying no taxes due to net operating losses. Yet if an individual is not allowed to deduct their own expenses especially if they are in a lower income bracket they will pay more even though they have to keep up their household expenses such as rent, utilities, insurance, medical expenses. Being in a lower income

bracket the way tax policy is structured penalizes one for not making enough money, in other words keeping the lower income brackets paying more while the higher income brackets pay less. The most you hear on reform is to lower rates and eliminate some deductions. Well for those who are in the lower brackets, this doesnt help. Even if you are in a lower income bracket and have a home that you pay a mortgage on, you have an advantage over the person who is in the same situation and only rents. To level the playing field on everyone, you have to have the same set of rules. Income whether from investments or capital gains should simply be taxed as ordinary income. In this way, no matter how you generate revenue it is treated the same way as earned income. If you prescribe to the theory that corporations are people then should we not be able to take the same deductions? Corporations can take tax deductions on state and local taxes, but if you do not own a home, you are considered to not have the same privilege on a tax form. Just think about it, you work with your hands, you pay state income taxes, sales taxes and yet since you dont make enough money, you are penalized and are excluded from reducing your taxable income.

Corporations and those who own homes get the privilege to deduct charitable donations, restricted casualty losses and DMV fees. As a non-home owner you end up not being able to take any of these off your tax return, unless you are paying more in other areas that exceed the standard deduction. It is time to set aside a tax code that places corporations and those in upper income brackets to more advantages, than the rest of us. We need fairness that allows everyone to use their normal expenses like everyone else. What I would propose is that the individual returns also allow everyone the same advantages as everyone else. This may be a radical idea, but in practice it would address the fairness issue and level the playing field. The first point all income is income. We do not make any distinction or Special Treatment on how the income is earned or not. The second point is that everyone should be allowed to deduct their rent or mortgage, utilities, Insurance (no matter what type), gas or transportation cost (such as taking the bus, train, cab), food, tax preparation fees, uniforms, investment expenses, unreimbursed business expenses, 100% charitable donations, 100% of theft and casualty losses using fair market values for personal property, state and local taxes, interest expense on automobiles, repair and maintenance costs on personal property.

Basically we should be allowed to deduct those everyday costs from our income. Corporations do it and those who are in the higher brackets can also do it, so we should be able to do the same. Those in higher brackets dont get to deduct life insurance, but it is an expense that is deductible by corporations, which isnt fair either. If life insurance was deductible by all Americans, can you imagine the increase in the sales of life insurance? Let us examine unemployment compensation, we have to claim it as income, yet it is usually about half of what we had normally earned. Then we are expected to pay taxes on this income, when we have incurred expenses such as rent, gas and job hunting expenses, utilities etc. We are not allowed and have no meaningful deductions against this income as a single person without children or a home. If that individual has a rent that is higher than a home owner then that person is placed at a disadvantage. If the reasoning is that he has fewer expenses that is not necessarily true. That single person could be in an apartment that cost twelve hundred dollars a month, while the home owner has a mortgage of one thousand dollars a month. IRAs and 401Ks should not have any limits. Savings for retirement is important. Yet how can one say Americans do not want to save, when they are restricted from saving the amount of monies necessary to retire comfortably. These amounts combine with Social Security should be means tested. If Americans are encouraged to

save, then that would put less stress on Social Security and Medicare. By means testing one can then adjust the amount of benefits they receive, by the way, no caps on FICA. FICA and Medicare will also apply to all incomes no matter what the source is. When one cashes out on stocks, bonds or any derivatives FICA and Medicare Taxes are taken out of the gains. There should be no deductions for vacation or second homes, yachts or personal airplanes or their repair and maintenance costs. Only your primary home receives that treatment even if you rent. Alimony and child support payments should not be taxed or deducted, as that income has already been taxed by the person who paid the support. Leave all the other rules regarding child tax credit and child care and dependent credits intact. Eliminate standard deductions and base deductions against actuals, but allow one exemption each per family household member and their dependents, at current rates subject to cost of living increases. This tackles our individual returns, increases the fairness of taxation. One can leave the current rates right where they are and everyone is on basically fair footing. Note also that documentation of all expenses must be available or you cannot take those deductions. In addition, there will be no carry back or carry forward of losses incurred by real estate type businesses or sole proprietorships. This will stop business welfare.

Self-Employment tax should be the same as an employee. To have to be taxed on FICA and Medicare as the employer and employee is completely unfair. If you want to have fairness, just because a sole proprietor isnt formed as a corporation, one should not penalize him for having his or her own business. In this way, no matter what your income is, everything is completely fair. Just looking at my home basic expenses Rent, Utilities, Auto Insurance, Auto Repairs and Maintenance, Food, Gas and Job Hunting Expenses, come to $ 15,000 for the year. My standard deductions and exemptions come to $ 9,500, so I have a $ 5,500 difference that I am being taxed on. If the Politicians want to have fairness, the example above is a good place to start. Also, we would exclude the purchase of a new vehicle, TVs, Radios etc. These are not basic items that one needs. The argument of having a car as a luxury is no longer a viable argument. When you are in a rural community, a car is the difference between working or not. If you commute to work, why isnt that deductible? Now if you add in medical, children and other insurances you will have even more expense before you even come to your actual taxable income. Let us face the truth, the tax code is written to favor those who have more and repress those who have less. I

am not suggesting that there be any changes other than allowing the American Public to reduce their taxable income by their actual expenses. This will level the field and allow everyone no matter what their income is to be taxed fairy. In this way, you will keep more of your own money and be allowed to grow right from where you are. No longer will the tax bite be problematic. You will have more money to save for retirement, your taxable income will be radically reduced and your level of income will be modified by your level of basic expenses. Those who have more, under this tax reform will end up paying more, since they will only be allowed to take their basic expenses and nothing else. You can then leave rates right where they are or go back to the rates under Clinton because the field is completely leveled. Now that is true tax reform. The next part is more complex, this tackles corporations, partnerships, and sole proprietors.