If we end up doubling the standard deduction and do not even change the tax rates the same couple would get back between $1,705 and $2,280 more than they currently due by itemizing. In addition, they would save both time and money preparing their taxes. The only ones who would still benefit from itemizing if the same deductions are left in place are those who can afford over $25,400 in things to deduct.
Yes, some people living in states with really high property taxes, housing costs etc. like California and New York would likely still be able to benefit by being able to deduct property taxes and mortgage interest but why should our Federal tax code be designed to benefit people in only a few states? Rather someone pays more locally in taxes should not affect what your fair share of federal taxes is.
The bad news is the latest reforms being discussed will keep the deductions for property taxes and mortgage interest. Instead, I hope they first eliminate all deductions and double the standard deduction. Then go back on separate bills to add back any deductions they think they must. I doubt they will get much support outside of California, New York, New Jersey and Hawaii for adding back a deduction for home mortgage interest or for local property taxes. If these deductions got support from our NC representatives it would clearly be a tax cut for the better off among us and not the middle or lower classes. Tax credits for such items as solar, wind or electric vehicles would probably see enough bipartisan support but not much else would.
Unfortunately, this is not likely to be the approach though as few if any Democrats would vote to pass the first reform and the Republicans in those few states will not vote for it either. So ironically, but not surprisingly Democrats will block complete tax reform and preserve a deduction for just the upper class in a few high cost/tax states. If Democrats truly want to make this reform benefit the lower and middle class more and the upper class less then they need to think about what is likely to happen if they don't support a complete simplification of the tax code. The Republicans need to pass something and will only be able to pass a reform with the support of Republicans in CA, NY etc. so they will pass a bill that keeps the deduction for mortgage interest and property taxes that will only benefit the upper class in most states and the better off home owners in a few high cost states.
It would be in the Democrats best interest to join in bi partisan tax reform that benefits the lower and middle classes by doubling the standard deduction and eliminates all deductions and then let the Republicans insist on adding back a deduction for home mortgages and property taxes that will not benefit renters nor anyone owning a home without a mortgage left on it or that is worth less than $300,000 in most states.
Neither the Democrats nor the Republicans are likely to put people first but will instead put politics in front of people. While Libertarians such as myself prefer no Federal income taxes and lower federal spending we support any moves in that direction such as good tax reform. If we must keep federal taxes because we prefer the historically high level of federal spending then Libertarians prefer the current tax code be scrapped entirely and be replaced with the Fair Tax which is the best way to tax in terms of encouraging economic growth and manufacturing jobs. It can also be adjusted to be as progressive as you want by changing the monthly per person prebate amount up or down. Details can be found at www.fairtax.org
Mark Byrne, Vice Chair
Libertarian Party of Catawba County
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