Subject: Tax Reform Proposals Comment: Standard Deduction, Mortgage Interest Deduction, and Lifetime Savings Accounts. (Word 2003 document) Standard Deduction We can simplify taxes by standardizing the standard deduction. We can help the majority of taxpayers by increasing the standard deduction. If you are single, your basic standard deduction for 2004 is $4,850; head of household – $7,150; married filing jointly or qualifying widow or widower – $9,700; or married filing separately – $4,850. In some cases, your standard deduction can consist of two parts, the basic standard deduction and additional standard deduction amounts, for age, or blindness, or both. I propose a single $10,000 standard deduction (combined $20,000 for those filing jointly.) Individuals claimed as a dependent on another’s return would no longer be eligible for a standard deduction. I think that would create a fair and simple base for any graduated or flat tax system. We would free many from the need to itemize. We would relieve the tax burden on those earning a minimum wage. Mortgage Interest Deduction For you to take a home mortgage interest deduction, your debt must be secured by a qualified home. This means your main home or your second home. A home includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities. We should encourage homeownership but reduce demand on home mortgages/rates by allowing mortgage interest deductions on a single homestead. Lifetime Savings Accounts The president once proposed Lifetime Savings Accounts, or LSAs. These accounts would offer generous contribution amounts, no income limits, and complete freedom to use the money however and whenever the owner wishes, without tax or penalty. The contributions would not be tax-deductible (that is, they would be made with after-tax dollars), but earnings would accumulate tax-free and withdrawals would not be taxed. This would encourage savings and there would be no tax complications. |