Individual Income Tax Reform

The changes in the Individual Income Taxes look minor and not as necessary as the corporate tax cuts. The proposals from the House and Senate go after deductions, because Republicans won’t abolish the Senate 60 vote rule and they are attempting to reform the tax code using reconciliation that allows for a simple majority vote in the Senate. This rule should be eliminated to allow for federal spending cuts, Obamacare repeal, Immigration reform and other reforms we need to make.

 

The US tax code that controls our individual taxes has a history of allowing deductions for categories of spending that government has deemed to be worthy to be deducted to lower our taxable income.  These deductions have included charitable contributions, medical costs, home mortgage interest, State and local property taxes, State and local income taxes.  Medical costs were restricted with a 10% of income barrier in 1986.

 

Now, Congress is considering individual income tax rules that would likely change how we do out 2018 taxes in April of 2019. 

 

They kept the charitable contributions, but put caps on the amount of mortgage interest rate we could deduct. They also kept the 10% hurdle for Medical costs. They want to remove deductions for State and local taxes and they are silent on Student Loan interest. 

 

They want to eliminate the Personal Exemption completely, but double the $6300 Standard Deduction.  The Personal Exemption allowed for a $4050 deduction for each dependent claimed including dependent children. It looks like taxpayers who have used this deduction will lose it for dependent children.  There might be a deduction for dependent children in the new Bill, but it is unclear how it works and it could appear somehow in the Child Credit in CID that has suffered so much fraud from illegal Mexicans who claim all of the Mexican relatives as dependents.

 

Retirees on Social Security will still be subject to the taxation of their “benefits” and will require the continuation of the mind-bending calculations we attempt to complete each year. 

 

It’s hard to see how retirees and parents will be able to put all of this on a postcard, so simplification might reside in the code but not on the forms. Retirees will also have to report all benefits from Pensions, 401k distributions and Annuities as income. This double-taxation can be complained about, but not necessarily ended.

Norb Leahy, Dunwoody GA Tea Party Leader