NCPA - National Center for Policy Analysis


May 31, 2006

Instead of cutting taxes, how about reforming them, says Ramesh Ponnuru, a National Review senior editor?

In fact, why not propose a pro-family tax reform with a massive expansion of the tax credit for children as its centerpiece? Currently $1,000, the tax credit could grow to $5,000 per child, says Ponnuru:

  • The plan would keep growing over time, tracking the growth in wages, and it would be available to all parents no matter how much they earn, with the limit being the amount they pay in income and payroll taxes.
  • It would replace the standard deduction with a tax credit worth $1,500 for adult individuals and $3,000 for couples that can be used to offset income taxes.
  • All itemized deductions, other than those for mortgage interest and charitable donations, tax credits for daycare and adoption and the alternative minimum tax for individuals would be scrapped; the plan would also get rid of the separate tax schedule for "heads of household."
  • Separate tax rates for capital gains would also be abolished, and the six individual income-tax rates would be replaced with two: a 15 percent rate and a 30 percent rate.

Moreover, this plan would help families, promote economic growth, and simplify the tax code by bringing tax rates down and reducing their number, says Ponnuru.

The result would be a tax code very similar to the one we had right after the last big tax reform, in 1986, but with two differences, says Ponnuru: Tax rates would be slightly higher and the treatment of investments would be better.

Source: Ramesh Ponnuru, "A Tax Reform to Run With," National Review, April 24, 2006.


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