Sunday, April 15, 2007

Tax Day Thoughts

I just filed my taxes for 2006 (the deadline is April 17 this year). I had to pay this year, not a whole lot, but I did have to send a payment to Uncle Sam.

As I said goodbye to my money as it makes its journey to Washington, I came upon this article in the Los Angeles Times:

SUE Carpenter pays about $6,100 a year in federal income taxes. But she might owe just half that amount if she had a mortgage, and nothing at all if she had minor children.

The fact that Carpenter doesn't have these deductions makes her part of a dwindling group: U.S. taxpayers. An estimated 50 million Americans won't pay any federal income tax this year. That's nearly a third of all adults, up from 18% in 1980.

To many, the shrinking tax base is not a big deal. Most of the people who don't owe Uncle Sam are of modest means. They don't pay because Congress approved tax credits aimed at helping working families and sought to encourage homeownership by making mortgage interest deductible.

I happen to be one of those people who get mortgage intrest deductions. Keep reading...

In 2005, a White House advisory panel proposed an array of changes aimed largely at simplification, including scaling back the mortgage interest deduction that for generations had helped persuade renters to become homeowners.

The panel also called for eliminating deductions for state and local tax payments and restricting tax-free health insurance benefits for employees.

Predictably, the real estate industry, healthcare providers and dozens of other special interests rose up in protest. The proposals went nowhere.

The article goes on to talk about some of the deductions we Americans get every year on our income taxes.

A few years ago, a friend who is an accountant said that one of the easiest ways to make the tax system simpler was to eliminate deductions. I would tend to agree, if we lived in a perfect world. But the fact is, we all like our deductions, be they the mortgage intrest deduction and the deduction I get off the interest on my student loans and I don't see many people wanting to give them up-unless they got something in return.

I know this might raise hackles, but I am beginning to wonder if a flat tax would be a good idea. I'd have to do more research, but I do wonder...

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