Recent tax reform discussions have involved proposals that would broaden the income tax base and reduce the tax rate. Other discussions have focused primarily on modifying the tax law so that only the most affluent Americans would pay more taxes, either as a result of broadening the tax base or raising tax rates. Broadening the tax base can involve subjecting more types of income to taxation and /or eliminating or reducing tax deductions. Locate at least two tax reform proposals that have been debated or are currently being debated where itemized deduction provisions would be modified. In a memo to your professor, evaluate each of the proposals in terms of costs and benefits and compare them to current law.
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In this memo I discuss two tax reform proposals that have been debated or currently are being debated where itemized deduction provisions would be modified.
The first tax reform proposal relates to broadening the base of tax by reducing deduction for mortgage interest, state and local taxes, and charitable contributions. The benefits of these deductions would be that the tax collected by the Federal Government will increase. The cost of these deductions is that the higher-income individuals will be taxed (Gravelle.J & Lowry. S, 2013). For example, state and local income taxes are levied mainly on high income individuals. By removing this deduction the Federal Government will be able to ...
The answer to this problem explains itemized deductions change proposals. The references related to the answer are also included. 450+ words.
Uniqueness of domestic production activities deduction (DPAD)
Thomas began a business, Gold, Inc., on July 1, 2010. The business extracts and processes silver ore. During 2012, Thomas becomes aware of DPAD and would like to take advantage of this deduction. Identify the relevant tax issues for Gold, Inc.
Further, the DPAD is unlike other tax deductions and is designed to provide a tax benefit in a somewhat unique manner. Based on the readings and examples, how is this deduction so unique? What types of businesses are permitted to use this deduction? Does the deduction fit the needs of those it serves?
Selection of Tax Issues
Milton and Shirley file a joint tax return on which they itemize their deductions and report AGI of $50,000. During the year, they incurred $1,500 of medical expenses when Brenda injured her knee. Furthermore, their dentist informed them that their son, Bryan, needs $5,000 of orthodontic work done to correct his overbite. Milton also needs a new pair of glasses that will cost approximately $500. What tax issues should Milton and Shirley consider? Explain.View Full Posting Details