Primary Principle – Taxes should be used primarily to fund government operations and not for economic incentives. Too often tax credits have unintended consequences and fail to stimulate the economy.

Personal Income Tax

Eliminate AMT and all tax credit. Tax credits while those for race horses benefit the few at the expense for this many.

Eliminate deductions of charitable contributions. Need to one tax payer subsidize another’s favorite charity?

Reduce a child deduction in order to some max of three younger children. The country is full, encouraging large families is overlook.

Keep the deduction of home mortgage interest. Owning a home strengthens and adds resilience to the economy. If the mortgage deduction is eliminated, as the President’s council suggests, a rural area will see another round of foreclosures and interrupt the recovery of market industry.

Allow deductions for education costs and interest on figuratively speaking. It is advantageous for the government to encourage education.

Allow 100% deduction of medical costs and health insurance. In business one deducts the price producing solutions. The cost of labor is simply the repair off ones very well being.

Increase the tax rate to 1950-60s confiscatory levels, but allow liberal deductions for “investments in America”. Prior for the 1980s earnings tax code was investment oriented. Today it is consumption focused. A consumption oriented economy degrades domestic economic health while subsidizing US trading spouse. The stagnating economy and GST Application Mumbai Maharashtra the ballooning trade deficit are symptoms of consumption tax policies.

Eliminate 401K and IRA programs. All investment in stocks and bonds ought to deductable only taxed when money is withdrawn among the investment advertises. The stock and bond markets have no equivalent on the real estate’s 1031 exchange. The 1031 real estate exemption adds stability to your real estate market allowing accumulated equity to be taken for further investment.

(Notes)

GDP and Taxes. Taxes can be levied as being a percentage of GDP. Quicker GDP grows the greater the government’s option to tax. More efficient stagnate economy and the exporting of jobs coupled with the massive increase in the red there isn’t really way the us will survive economically your massive development of tax revenues. The only possible way to increase taxes is to encourage huge increase in GDP.

Encouraging Domestic Investment. The actual 1950-60s income tax rates approached 90% for the top income earners. The tax code literally forced financial security earners to “Invest in America”. Such policies of deductions for pre paid interest, funding limited partnerships and other investments against earned income had the dual impact of growing GDP while providing jobs for the growing middle class. As jobs were developed the tax revenue from the very center class far offset the deductions by high income earners.

Today almost all of the freed income off the upper income earner has left the country for investments in China and the EU in the expense with the US current economic crisis. Consumption tax polices beginning planet 1980s produced a massive increase inside of the demand for brand name items. Unfortunately those high luxury goods were constantly manufactured off shore. Today capital is fleeing to China and India blighting the manufacturing sector from the US and reducing the tax base at a period of time when debt and an aging population requires greater tax revenues.

The changes above significantly simplify personal income duty. Except for accounting for investment profits which are taxed at capital gains rate which reduces annually based on the length of capital is invested quantity of forms can be reduced using a couple of pages.