Tax Panel Proposes More Changes

President Bush’s Advisory Panel on Federal Tax Reform is moving in the direction of simplifying the paperwork, but cutting back even more some of the most popular tax deductions, according to Jeffrey Kupfer, the panel’s executive director.

The panel is now proposing to do away with the current Form 1040 and replace it with a form called “1040 Simple” which would have 32 lines instead of the seventy-five lines the current form has. Also, the panel is proposing to reduce the number of related schedules and worksheets from 52 to 10.The full panel will vote on these proposals by November 1, 2005. The approved proposals will then be sent to Treasury Secretary John Snow. Of course, any tax bill containing these proposals will have to be approved and passed by both houses of Congress and signed by President Bush before these proposals can become law. With Congress scheduled to adjourn next month, its unlikely that there will be a new tax law before the end of this year. Even a tax law in 2006 could be iffy since 2006 is a congressional election year.

Taxpayers will pay a price for simplification, however. In addition to limiting the mortage deduction, the panel is also considering eliminating the deduction for state and local income taxes. This will hurt taxpayers in states that have high state tax rates. These high tax states, such as California and New York, will certainly lobby heavily against such a change in the tax law.

More of the panel’s proposals will be made public in the next few days. Many of the proposals are certainly not going to be popular.