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Five ideas to simplify the individual tax code

Americans spend an inordinate amount of time, almost 9 billion hours, complying with the federal tax code each year. Here are five ways lawmakers can help reduce the burden and give time back to taxpayers, according to Scott Greenberg with the Tax Foundation.

1. Increase the standard deduction

  • Households can claim a standard deduction of $6,350 for singles and $12,700 for married joint filers on their returns.
  • About 30 percent of households instead deduct itemized household expenses (such as mortgage interest payments and gambling losses).
  • By raising the standard deduction substantially, the burden of calculating itemized deductions will be removed for many households. 

2. Eliminate itemized deductions

  • Eliminate over a dozen itemized deductions from the tax code. This would simplify the tax filing process and increase the number of households choosing take the standard deduction.

3. Reform family tax provisions

  • Simplify tax filing for families with children by aligning and consolidating the various family-related provisions in the tax code. 
  • Include consolidating definitions and eligibility requirements for a wide range of provisions, such as the child tax credit, the personal exemption, the earned income tax credit, the child and dependent care credit, and the head-of-household filing status.

4. Consolidate tax code savings programs

  • Consolidate rules regarding eligibility, contribution limits, available investments, permitted withdrawals, required distributions, penalties, rollovers, and other details for tax-advantaged savings programs.
  • Include broad range of savings programs, such as the traditional IRA, a Roth IRA, a SEP IRA, a SIMPLE IRA, a 401(k) plan, a 403(b) plan, a 457 plan, a 529 qualified tuition program, a Coverdell education savings account, a health savings account, and ABLE accounts.

5. Eliminate the Alternative Minimum Tax

  • Eliminate the AMT, making the tax system less complex for millions of households by sparing them from having to calculate their tax liability under two sets of rules.

Each of these ideas comes with trade-offs that must be weighed against the benefits of reform. Read the details at Tax Foundation.

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