Richmond, Virginia (Thomas P. Marshall) – As tax time approaches, many people really appreciate how complicated the tax code is and how there has got to be a simpler way to do it.

Those people would have plenty of company in that line of thinking. President Barack Obama has said the code needs to be streamlined and created a task force to recommend changes. He named as its chairman Paul Volcker, who, as the former head of the Federal Reserve, has been credited with taming another monster – the roaring inflation rate of the late ‘70s.

Although that group has not come up with recommendations, a couple of senators put forward a proposal in February that would significantly affect the code. Sens. Judd Gregg, R-N.H., and Ron Wyden, D-Ore., introduced the bill, which goes by the modest name of the Bipartisan Tax Fairness and Simplification Act of 2010. It would cut the number of income tax brackets in half and flatten the corporate tax rate.

There would be just three tax rates: 15 percent, 25 percent and 35 percent. The bill would also eliminate the alternative minimum tax, which threatens to ensnare middle-income taxpayers each year unless legislators pass a “patch.” Also, most taxpayers would be able to use a one-page form to submit their taxes, the senators said.

The law would almost triple the standard deduction and reduce taxes for those earning less than $200,000, Wyden said. It would still allow deductions for mortgage interest, charitable contributions and child tax credits.

The corporate income tax would have a single rate of 24 percent but allow small businesses with receipts of up to $1 million to expense equipment and inventory costs.

The capital gains tax also would be changed. The law would exempt the first 35 percent of capital gains income from the tax. The first $500,000 of investment would be considered long-term capital gains income after six months rather than a year.

The House of Representatives is expected to offer its own version of tax simplification.

This entry was posted on Monday, March 1st, 2010 at 7:27 pm and is filed under Tax Advice. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.