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Thursday, September 23, 2004

The Bush Second Term Tax Plan ... you can still prevent it
Posted by Jill | 7:23 AM
Ron Suskind has an image file of a 2002 Administration document containing a blueprint for some major revamping of the income tax structure. Yes, it's two years old, but given that George W. Bush has recently spoken out favorably about a flat tax, it'w worth revisiting.

All the options are some variety of a flat tax under the guise of "simplification." One of the alternatives it pushes is a consumption tax replacing the progressive income tax. This is about as regressive as it gets. Imagine paying 20% - 25% on your groceries, utilities, gasoline purchases, clothes and school supplies for the kids, car repairs, home improvements, and EVERYTHING ELSE YOU BUY. Want to know how regressive such a tax is? Think about how much you have left after you buy your necessities. Now think about the guy on the other side of town who makes well over six figures, and how much HE has to buy necessities. Bottom line here: you'll pay a heck of a lot more PERCENTAGE OF YOUR TOTAL INCOME in tax than he will. Not to mention how such a tax DECREASES consumption, and since this Administration has been Worshipping Before the Altar of Consumer Confidence and Consumption since day one, this could put a real crimp in the economy.

Another option is a flat income tax, which would eliminate ALL of your itemized deductions. ALL of them. Your deduction for your kids? Gone. Medical expense deduction? Gone. Mortgage interest deduction? Gone. Property tax deduction? Gone. (Side note: This would WALLOP those "blue states" with high property taxes, but that's probably the whole point...penalize those states that do not vote for Der Füehrer0. One other thing to keep in mind is that keeping such a flat tax "revenue neutral" would require a 20-25% flat tax rate. For most working- and middle-class Americans, this would constitute a HUGE tax increase.

Just FYI, a married couple filing jointly will pay the following RATES in 2004 under the current system:

The first $14,300 of income is taxed at 10%.
The amount between $14,301 and $59,100 is taxed at 15%
The amount between $58,101 and $117,250 is taxed at 25%.

So if your TAXABLE INCOME (that is, after the deductions for your children, your mortgage interest, your property taxes, your medical expenses, your unreimbursed employee business expenses, AND your 401(k) contributions are deducted from your gross income) is less than $117,250, you're paying 19% of your GROSS income in federal income tax. Not a heck of a lot, right? Even if your taxable income is that high, which means that your gross annual pay is probably $135K or more, that's all you pay.

If your taxable income is, oh, say, $60,000 (which means you're probably pulling in $75-$80K gross), you will pay $8475 income tax, or 14%. Which means that a 20-25% flat tax would be a 6-9% tax increase for you.

So if you think a flat tax would be good for you, think again. Sure the tax system is complex. Yes, doing your taxes sucks. But are you willing to give up 10% of your income to simplify it?

It's all here. Go read it...BEFORE you go into the voting booth.

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