[This is a continuation of the article on our tax code from American Panthers Newsletter Issue number 4, page 2.]

Our Federal tax laws are currently so complex that even the most experienced IRS agents do not know most of it. In addition they favor the wealthy over the middle class and, for people with clever accountants, they are easy to evade.
American Panthers has created the Form 1040 shown below. It vastly simplifies and improves the current Federal income tax rules. While we can address only a small part of our 17,000-page tax code, we believe that the changes on our proposed Form 1040 are a very good start.
One innovation has nothing to do with taxes. Believe it or not, there is currently no comprehensive database of American citizens. By making an annual tax return compulsory for all citizens, the basic census data can be collected and computerized. We can thereby more easily separate citizens from non-citizen residents, and allow the benefits of taxpayer money to be directed only to legitimate citizens of the United States. Among other things, these benefits will include government sponsored healthcare benefits and the right to vote. It will also make our census more accurate and eliminate the need for a special count each decade. Separately, the government should keep accurate track of non-citizens in this country, and enforce all of the laws and regulations applicable to them.
The Social Security Number is now more important than it has ever been, and will become more so in the future. It is vitally important that all citizens have one, unique, number. The Social Security Card must be made extremely difficult to forge, and contrary to current law, must be made a vital part of the identification process for each citizen. Identity theft of an American citizen must be made an even more serious crime that is even more seriously enforced. The data collected on the average citizen must be basic and non-intrusive. The Form 1040 on the next page suggests that it be limited to the name, address, date of birth and sex of each citizen. Other important information for the protection of our society can be added as needed, such as labeling sex offenders. Needless to say, the database should be inaccessible to all but authorized persons and only for congressional or court authorized reasons. The proposed Form 1040 is for United States citizens only, regardless of where they live. All residents in a given household can put their information on a single return or any resident can, for privacy purposes, file their own return. The basic information for citizens without income can be entered themselves or by their parents, guardians or representatives.
The American Panthers’ 20-20 tax plan, first introduced in newsletter issue 4, is demonstrated by the proposed Form 1040 on page 5 of that newsletter and shown below here. The basic premise of the plan is that tax returns are individual, and not joint. The standard deduction per individual is $20,000, and the tax rate is a flat 20% for amounts above the standard deduction up to $500,000, where it goes to 50%. The standard deduction, percents and income levels are not written in stone, and can be altered to allow for inflation and the revenue needs of the nation.
Regardless of minor adjustments, certain principles must remain intact. One is that low wage earners should pay no federal income tax. People who need their income for basic essentials should not have that money taken away from them. A wage of $10.00 an hour will roughly equal the $20,000 standard deduction.
Whether people are legally married, or just living together, should be a moot point for tax purposes. American Panthers believes that the lifestyle relationship between two people is not the business of the government. Therefore the designations of “spouse” or “head of household” are eliminated from our proposed Form 1040. The only place where the government has the right (actually, the obligation) to interfere is where the welfare of a child becomes involved.
The proposed Form 1040 treats all income equally. Wages, interest, long and short term capital gains, dividends, and so on are all added up to get a single total income number. This simplification eliminates thousands of pages from the tax code, closes loopholes, creates fairness and eliminates a lot of paperwork for taxpayers and tax preparers. The Alternative Minimum Tax (AMT) is eliminated as well.
The itemized deduction form, Schedule A, will handle deductions, adjustments and credits, all under the name of “deductions”. This page will actually increase in complexity a little, and will have to be discussed in a future article. The good news is that, with a $20,000 standard deduction, fewer taxpayers will have to submit Schedule A.
The pages of tax tables will no longer be necessary. The exact tax is calculated by simple math right on the Form.
If you take a look at the current Federal Form 1040, you will notice that lines 23 through 56 are about adjustments, credits, the AMT and other details. While many of the credits seem to be done in good faith, American Panthers believes that the taxpayer would be better off with the $20,000 standard deduction, or the larger itemized deduction from Schedule A. If you have not recently taken a good look at the Federal Form 1040(and who could blame you!), then do so. The form itself will convince you how preposterous our tax laws have become, even if I couldn’t.
The next step in this process is to discuss Schedule A, and the allowable credits, adjustments and deductions. How about Emailing me with your thoughts on that subject? I’d like to hear from you.

LHS

[This is a continuation of the article on our tax code from American Panthers Newsletter Issue number 8, page 4.]

This is the last of a major series of articles on simplifying our tax laws. While we can address only a portion of our 17,000-page tax code, we believe that the changes we propose are a very good start. These changes will lead to immense simplifications and close gaping loopholes designed to benefit the wealthy.

Exact dollar amounts suggested are naturally subject to modification. Even our title, the “American Panthers’ 20-20 Proposal for Tax Simplification”, is chosen as much for being a good sound bite, as it is for practical reasons. Both the $20,000 standard deduction, and the 20% flat (almost) tax rate can be modified for workability reasons.

The proposed Schedule A on page 5 combines adjustments and deductions in a simple list that can just be added up and transferred to Form 1040. Hopefully, anyone who earns less than $50,000 will be better off with the standard deduction. This alone will be a huge simplification for most taxpayers.

Line 1 is meant to emphasize the fact that anyone who runs his own business (writes his own check) cannot take business expense deductions on the tax forms. Business expenses must all be included on the taxpayer’s business income statement. Net business profits remaining are taxed on the taxpayer’s business tax return, and income withdrawn is included on his personal tax return. Unreimbursed employee expenses, on the other hand, are legitimate deductions and have been moved from Form 1040 to Schedule A in the American Panther’s 20-20 Tax Simplification Proposal.

The suggestions on Line 3 and 4 are a bit radical. Middle-income people, who must take public transportation in order to get to their jobs, are entitled to a deduction. Low end wage earners are probably better off with the standard deduction. Higher end wage earners who may drive to work get no extra benefit here. If you question the fairness of this system, I would like to point out that the government taxes its citizens because it is a necessary evil, and not because it’s fair, although they should do the best they can.

As for Line 4, many people who rent an apartment do so because they cannot afford to buy a house. The “American Dream of Owning a Home” aside, people who own homes are usually better off than those who do not. Therefore the tax proposal equalizes the tax benefits given to homeowners and renters. The mathematics means that for a couple living in a low-income apartment and paying a rental of $333 per month, the entire amount would be tax deductible when half of the yearly rent is deducted from each of their salaries. For a wealthier homeowner, paying $1000 per month in mortgage interest, they will only be allowed to deduct $2000 of the $12,000 interest expense.

Line 5 encourages retirement savings but not for persons who can afford to put away more than $5000 per year. Lines 6 and 18 compensate somewhat for education expenses for the middle class, but does very little to help those who can afford an expensive Ivy League college.

Lines 7 and 8 compensate for healthcare insurance and expenses in any amount and without a deductible. As we have made clear, affordable healthcare and health insurance is vital for American Citizens. A tax advantage for medical expenses is an important part of that effort. By the way, this should include basic dental care also. Timely dental maintenance procedures prevent more serious future expenses. It is beneficial to American Society, and the individual, to avoid those needless expenses and their concomitant suffering.

Line 10 is designed to take the place of dependant deductions, which really do not belong on Form 1040. Taxpayers should definitely be compensated for the care of elderly parents as this benefits all of society. Children are a more difficult problem to resolve. It is a very highly politically charged position to take that children are a luxury and an expense of their parents’ own making. I favor the concept that people should not have children that the rest of society will ultimately have the obligation to support. That said, America can not allow children to be undernourished, poorly educated, medically untreated, inadequately housed, or otherwise abused. This is one of the great moral dilemmas of modern society, and I am happy to leave it here without further discussion.

Any tax paid, or alimony paid, should be deductible. Alimony is an income item for the recipient.

Donations are a big loophole which lines 20 and 21 are designed to close. Cash donations are 100% deducible, but item donations have a $2000 maximum. Wealthier taxpayers have long been able to get away with high valuations for their item donations, leading to tax breaks that can exceed the real value of the donation. If the item is really that valuable, let them sell it to a legitimate third party and donate the cash.

In all cases, the maximum allowable deduction is a judgment call. My suggestions can serve as a starting point for further discussion.

I ask members to take a look at the “Schedule A” on page 5 and let me know if you would modify anything. In the future American Panthers will support tax reform using general terms, like “Close Tax Loopholes for the Wealthy”, or “Simplify Our Tax Laws”. It is difficult to argue the fine points of tax reform. These points really have to be worked out by committees of highly experienced individuals.

Our members should know that the “American Panthers’ 20-20 Proposal for Tax Simplification” is a dynamic, ever-changing, ever improving document.

LHS