The Swamp Is Worried, Fewer People Are Itemizing
For decades, many taxpayers could obtain some tax benefits by itemizing deductions from their income on Form 1040 Schedule A.
The principal deductions taken were for home mortgage interest, charitable donations and state and local taxes. If a taxpayer’s total deductions exceeded $6,500 for a single filer, or $13,000 for a couple filing jointly, they would list these deductions on Schedule A of their 1040 form. This led many of us to feel like we were getting a “benefit” from the tax code.
The truth is the great majority of taxpayers who listed deductions on Schedule A were often not getting very much in actual tax savings. For example, if a couple filing a joint return had a total of $16,000 worth of deductions, they would list those deductions on Schedule A. This would allow them to reduce their taxable income by $16,000 and not the $13,000 allowed by the standard deduction.
This means itemizing deductions let them pay income-tax on $3,000 less of their total income. If they were in the 20% tax bracket, they would save 20% of $3,000 or $600 in income-taxes. While this is still a benefit, tax preparers often charge additional fees to prepare a more complicated return, making the net savings even less.
Contrast this with a higher income taxpayer in the 35% tax bracket who has $30,000 worth of itemized deductions. For this taxpayer, itemizing deductions rather than taking the standard deduction means he’s paying tax on $17,000 less income. (30,000-13,000 = 17,000).
His tax savings would be 35% of $17,000 which is $5,950. This is why higher income taxpayers really like being able to complete Schedule A. The rest of us are helping subsidize their higher mortgages, higher charitable contributions and some of their state and local taxes.
In an article for the Tax Foundation entitled “How Many Taxpayers Itemize Under Current Law?”, Scott Eastman points out:
- Overall, the number of itemizers for 2019 was down from 31.1% of tax filers to 13.7%
- The group making $55,000 per year saw the percentage who filed Schedule A decrease from 21.9% to just 5.3% of these filers
- The group making $110,000 per year saw the percentage who itemized decrease from 82% to 50.2%
- The only group with essentially no change were people making over $300,000 per year. In that group, the percentage who itemized deductions decreased from 92.1% to 91.5%, a measly six tenths of one percent
Of the approximately 140 million individual income-tax returns filed in 2016, only about 22 million reported incomes in excess of $110,000. So, it’s clear most of the benefit of itemized deductions is enjoyed by the highest earners.
The Swamp and The Ruling Class liked making the rest of us use Schedule A because they could control us by threatening to take away some of our deductions at any time. If the rest of us can now reduce our income-tax without having to itemize deductions, then that is a control point that The Swamp and The Ruling Class can no longer use to keep us in line.
The Swamp and The Ruling Class are also realizing making taxpayers less reliant on Schedule A was a mistake because more Americans aren’t taking the itemized deductions and don’t feel like they are getting any real benefit from the income-tax.
In their defense, The Swamp and The Ruling Class apparently were distracted by the feeding frenzy generated by the vast amounts of money being paid to them to obtain or protect benefits for special interests. Uncharacteristically, they let this benefit for the rest of us slip through.
Conclusion
Throughout history, the most successful despots were the ones controlling their populations in many subtle ways. Isn’t that what The Swamp and The Ruling Class are doing by threatening to make us pay more taxes, not by increasing the tax rates, but by eliminating our ability to deduct items which reduce our total taxable income?
If we could deduct $4,000 one year and only $2,000 the next year, then our taxes go up by the amount of tax on that $2,000 we were not allowed to deduct. They can then look at us and say, but we didn’t increase the tax rate.
This tool is gone and you can see in many of the proposals made by the Presidential Democrat candidates they are seeking to put things back into the tax code that will seem to provide “benefits” for their constituents. Some of these proposals were almost certainly proposed by The Swamp and The Ruling Class.
American economist Thomas Sowell said, “The more people who are dependent on government handouts, the more votes the left can depend on for an ever-expanding welfare state". Isn’t an income-tax deduction a kind of “handout”? The Swamp and Ruling Class lost a lot of control over the great majority of us by giving us a higher standard deduction.
Of course, under The FAIRtax, all of these destructive games about deductions go away. With The FAIRtax, there is no income-tax. The only tax paid is a simple and fair tax collected when we make retail purchases of new goods and services.
It’s time for Congress to have serious discussions about replacing the failing income-payroll-tax-system with The FAIRtax, the only truly “Fair tax”!
Click Here for Scott Eastman Article referenced above
The author George Bernard Shaw said, "You see things; and you say “Why”. But I dream things that never were; and I say “Why Not”.
We say to you President Trump, “Embrace The FAIRtax and real tax reform! Stand up to The Swamp. They will oppose you anyway because they see you as a threat. What have you got to lose?”
The truth is the truth. Remember, if we don't continue to tell the truth and demand a change, then this quote from George Orwell's 1984 may foretell our children's future: “If you want a picture of the future, imagine a boot stamping on a human face—forever.”
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Read Evasion Study Summary
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This week's Episode #180 - "Ridiculous But Legal Tax Deductions"
We’ve seen plenty of evidence that our income tax code is too complicated, too convoluted and too much to keep up with. It only gets worse. Now we have proof from the IRS itself of more insanity - some of the tax deductions allowed by the IRS are just plain ridiculous!
For instance, you might be able to write off a horse if you want to impress your customers even if your not in the horse racing business. Or how about a dairy farmer who takes a trip to Africa? Yep - a write off as research.
These are but a few examples of ridiculous but completely legal tax deductions that some people have claimed leaving the rest of us to wonder “When are we going to stop the madness and go with the FAIRtax?”
To wrap up this episode we have an update on popvox.com and a look inside the FAIRtax Logo Store.
What Can Each Of Us Do?
Call the local and DC offices of your Representative and 2 Senators. Use the following script:
- I am sure Representative ____ or Senator ____ is in favor of everyone obeying the income tax laws.
- After they assure you their boss is not in favor of anyone breaking the law, ask if they are aware of the Cebula study showing $9 trillion of evaded income-payroll taxes over the next 10 years.
- Since most will say they don’t believe their boss has seen the study, drop off a copy, email a copy or click Read Evasion Study Summary and copy/paste the link into an email.
- Say you are going to call back in a week and ask what the Representative or Senator is going to do to stop this evasion.
- In a week, call back and ask specifically what the Representative or Senator is going to do to enforce the law.
- They probably will say their boss believes simplifying the income tax will handle the problem.
- Explain, when people evade income taxes, they are also evading the 15.3% payroll/Medicare tax and state income tax. So, it’s unlikely they are going to pay 30-40% when they were paying 0% because they have already decided it’s okay to cheat.
- Say, the only way to reduce evasion is to increase by tens or hundreds of thousands the number of comprehensive IRS audits done each year.
- Point out Evaders do not self-identify by putting an “E” on their income tax return.
- 80% of the people likely to be audited are trying to comply, but they will be forced to endure these IRS audits as well.
- Ask if the Member is in favor of this?
- If they say no, then ask again how the Member proposes to stop people breaking the income tax laws.
- Then explain the way to handle evasion without unleashing the IRS audits is The FAIRtax.
- If you meet with your Representative or attend a town hall and ask these questions, you will be even more effective.
American's Big Solution - The FAIRtax Primer America Needs
Hard to believe but there still are people who have not heard of The FAIRtax. For those people, America’s Big Solution provides a starting point in their study of The FAIRtax and is meant for any age.
America’s Big Solution is an introduction to The FAIRtax written by Terry Tibbetts, author of “A Spartan Game: The Life and Loss of Don Holleder”, with help from Ron Maiellaro, President The Florida FAIRtax Educational Association. You can buy an electronic version for only $2.99 for the Amazon Kindle, the Barnes & Noble Nook and Apple iOS. You can purchase a print copy at the same Amazon link above for $9.25.
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Steve Hayes
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