House to Vote on Tax Simplification Bill | AccountingWEB

House to Vote on Tax Simplification Bill

One of Congress's leading advocates of tax reduction and simplification, Rob Portman (R-OH), has introduced into the House of Representatives the Tax Simplification Act of 2002, a new tax act designed to make the tax code simpler for both families and businesses. Featured in the act are several tax changes that have gained popularity over the years:

  • Complete repeal of the Alternative Minimum Tax (AMT) for both individuals and businesses. Originally designed to ensure that a fair tax is paid by taxpayers who claim certain benefits that can lower their tax rate below the rate they would pay if those benefits were included in income, this difficult and confusing tax is now creeping onto tax returns of individuals with income below $50,000. And the non-partisan Joint Committee on Taxation has stated that the original purpose of the corporate AMT "is no longer served in any meaningful way."

  • Uniform definitions. The tax code contains five definitions for "qualifying child and nine definitions for "qualifying higher education expenses." This bill would create uniform definitions for these items that can be used throughout the code.

  • Simplify capital gains calculations. Replace the 17 different rates of tax that can apply to capital gains in different situations with a flat 50% deduction for capital gains.

  • Elimination of phase-outs. The bill would eliminate most of the more than 20 provisions of the tax code that are phasing in and out at different rates.

  • Combine Hope and Lifetime Learning Credits. A combined credit would replace the two existing credits.

  • Small Savers' exemption. Investors would be entitled to a deduction for the first $500 of dividend or interest income earned.

  • Repeal deadwood provisions. Many provisions of the tax code are outdated or no longer in use. This bill would remove more than 90 unnecessary provisions from the code.

"Our current tax code is a mess," said Congressman Portman. Congress is expected to vote on the bill this week or next.

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