Now that you know what it looks like, let me point out some glaring issues that I see immediately:
The most obvious is that lines 4-6 and 10-12 are deductions and credits that would still require additional worksheets/forms to be completed in order to calculate the totals – these calculations are not always black and white and many times require a tax professional. Also, these same lines are already on the 1040 tax form and are nothing new. The only difference is that you have probably 20-30 more lines on the 1040 and you simply skip the lines that don’t apply to you – leave them blank or enter -0-, simple as that. As I look a bit closer, the postcard tax return looks more like the one-page 1040 EZ that millions of taxpayers (without dependents) already use.
What about unemployment or social security/retirement benefits? These are typical sources of income received by taxpayers and would need to be accounted for. If that’s the case, this eliminates quite a few taxpayers, most importantly the elderly, that can use this “simplified” form. I guess it’s not so simple after all.
Personal exemptions no longer exist (this is for the overall plan and not just the postcard methodology), but standard deductions “roughly double”. Let me do some quick math. Under the current tax structure, a married family of five receives a standard deduction of $12,700 and $4050 personal exemption per person totaling $32,950. Under the proposed plan, the personal exemptions no longer exist and the standard deduction for the married family of five is $24,000; on the other hand, it would be $32,950 under the current plan – an $8,950 loss under the proposed plan. Let that marinate.
At a quick glance, this postcard tax return doesn’t hold up to my expectations. The removal of personal exemptions and “roughly doubling” the standard deduction isn’t as beneficial as it appears on the surface. One other thing to note that comes straight from the Ways and Means Committee website, one of the highlights of the plan is that it:
Lowers the corporate tax rate to 20% – down from 35%, which today is the highest in the industrialized world – the largest reduction in the US corporate tax rate in our history.
Corporations are seeing some of the largest tax breaks in US history under this plan, while a married household of five sees a decrease in eligible deductions by $8,950 (and that’s only from the removal of personal exemptions and increasing the standard deduction). I will say that this quick overview does not consider the rest of the tax plan, but I can almost guarantee you that the plan isn’t breaking record numbers when it comes to savings for the average US taxpayer. Corporations are winning even more under this plan, while middle and low-income taxpayers are dangled a carrot to distract them.