Bush Tax Cuts Offer New Options
February 14, 2001
The Bush tax cut proposal is taking shape. It includes a cut in the top federal income tax rate from 39.6 percent to 33 percent, still two percentage points higher than it was nine years ago. To find out how much your taxes would drop under the Bush plan, Intuit offers a free income tax estimator at http://www.quicken.com/taxes/estimator.
The plan will also create a new tax decision for some people.
About seven of ten taxpayers take the standard deduction, don't itemize, and can't write off charitable donations. Under the Bush plan, they would be able to take the standard deduction and itemize charitable gifts.
- The amount of the donation deduction could be as much as the amount of the standard deduction, $7,600 for married couples filing jointly and $4,550 for most singles in 2001.
- If the plan becomes law, some philanthropists who itemize should consider taking the standard deduction, according to Martin Nissenbaum of Ernst & Young in New York.
- As an example, consider a couple with $10,000 in itemized deductions including $4,000 in gifts.
- That couple would be better off with the standard deduction because they could deduct as much as $11,600, instead of $10,000.
In addition to lower taxes, many critics are arguing for simpler taxes as well. The Standard Federal Tax Reporter totals a record 45,662 pages this year, up from 40,500 in 1995 and 16,500 in 1969. Another problem is language. In a letter to Treasury Secretary Paul O'Neill, the American Bar Association tax section, the American Institute of Certified Public Accountants tax division and Tax Executives Institute wrote taxpayers' inability to understand and comply with the law "cannot help but reduce compliance, increase the cost and complexity of administering the tax system and undermine the public's confidence of government in general."
Source: Tax Report, Wall Street Journal, February 14, 2001.
For WSJ text
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