William Thien

The Gradual Income Tax Deduction Reduction Method. Towards a More Fair Tax Code Part IIII.

Posted on: March 25, 2014

In having a conversation with some other taxpayers (those who don’t have many deductions so they still have to pay taxes as opposed to others who have so many deductions they don’t pay any taxes at all), in talking to the other taxpayers about the various tax deductions I am not eligible to use yet pay for, someone brought up the subject of why “we can’t” eliminate deductions once they are in the tax code. “If you eliminated the dependent deduction, you might put people in the poor house,” she said. Another brought up the subject of the mortgage interest deduction and in some cases, people rely so heavily on that particular deduction that it would knock them out of their houses if they couldn’t use it.

But it’s still unfair to give those two deductions or numerical equivalents of them to certain people and not to others. So if it became necessary to take those deductions out of the tax code, since people rely so heavily as I’ve described in previous posts on those deductions, to simply take the deductions out of the tax code would have a dramatic effect on their finances, probably sending many who use the deductions into sudden economic trauma. They would suffer tax deduction withdrawal, so to speak.

I have a solution. Instead of writing the deductions instantly and completely out of the tax code, gradually lessen the amount of the deductions users can write off until there is no deduction any longer. Phase them out and adjust the tax code so that it is fair for all. Decrease the deduction amount by 25% a year, maybe ten percent a year, whatever would be most suitable until there is no deduction there any longer, letting the users of the deductions adjust to no longer having the deductions. The end result would be a flatter, more fair tax code.

In that way the deduction users could adjust to the new tax code and not rely so heavily on what are essentially socialist handouts funded by those who are not eligible for the deductions.

The same method could be used for corporations. In that way you could lower corporate taxes for all corporations because some, just like in the tax code people use, obviously benefit from the corporate tax system more than others.

More on deductions later.

Copyright © William Thien 2014

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