# Presentation: 354142

## Presentation to the President's Advisory Panel on Federal Tax Reform

- May 11, 2005

- Roland Boucher
- United Californians for Tax Reform

## Overview

- A PROPOSAL TO REDUCE THE TOP TAX RATE TO 20% BY ELIMINATING THE PERSONAL EXEMPTION AND DEDUCTION FOR STATE TAXES
- Proposal
- Benefits of the Proposal
- Simplification
- Fairness
- Administrative Ease
- Promotes Economic Growth
- Other Effects of the Proposal
- Transition Costs
- Revenue Impact

- United Californians
- for Tax Reform

## A Proposal to Reduce the Top Tax Rate to 20%

**The Proposal**
- The seven key points of our proposal are as follows:
- Eliminate all deductions for state and local income, sales, and property taxes
- Retain all other deductions, including home mortgage interest and charitable contributions
- Eliminate all personal and dependent exemptions.
- Increase the standard deduction to $7950 for single tax filers and $15,900 for joint tax filers
- Retain the maximum tax rate of 15% for income from qualified dividends and capital gains
- Replace the 25% tax rate with a 20% tax rate and eliminate the 28% 33%, and 35% tax rates
- Retain all other tax code provisions, including adjustments to gross income (AGI) (such as IRA contributions and alimony payments) and tax credits (including the child tax credit)

- United Californians
- for Tax Reform

## A Proposal to Reduce the Top Tax Rate to 20%

**Benefits of the Proposal**
- _Simplification_
- Reduce the number of tax brackets from six to three
- Reduce the number of taxpayers who claim itemized deductions from 40M to under 10M
- Withholding easier to compute
- Record keeping not necessary for most taxpayers
- _Fairness_
- Reduce the disparity of the Federal tax burden for taxpayers at the same income level
- Reduce the disparity of the Federal tax burden between taxpayers from different states
- Raise taxes for no taxpayer who now claims the standard deduction

- United Californians
- for Tax Reform

## A Proposal to Reduce the Top Tax Rate to 20%

**Benefits of the Proposal **(continued)
- _Administrative Ease_
- Withholding easier to compute, for employers and financial institutions
- A simple tax table with single 20% rate above it will reduce taxpayer filing errors
- Reduce the number of taxpayers who claim itemized deductions from 40M to under 10M
- _Promote Economic Growth_
- Lower the top marginal tax rate by nearly 50 percent from 35% to 20%
- Reduce disincentive to work
- Reduce marginal tax rate for many small business owners

- United Californians
- for Tax Reform

## A Proposal to Reduce the Top Tax Rate to 20%

**Other Effects of the Proposal **
- _Transition Costs_
- None expected
- _Our Proposal is Revenue Neutral_
- Eliminating the deduction for all state and local income, sales, and property taxes will increase revenue by $73 billion
- $73 billion is twice the revenue that was collected by the 28%, 33%, and 35% tax rates making it possible to drop them entirely and reduce the 25% tax rate to 21.4%
- Eliminating the $3100 dependent exemption, and folding it into the standard deduction, allows the top tax rate to be further reduced to 20%
- Revenue analysis performed on computer model of US taxpayer developed by UCTR

- United Californians
- for Tax Reform