The following syllogism will help Congress pass a great tax reform bill:
The main reason that doing tax returns is so complicated is that tens of millions of Americans itemize their deductions, rather than take the standard deduction.
The higher the standard deduction, the fewer taxpayers who will itemize their deductions.
Therefore, to have meaningful tax reform, we need to not just double the standard deduction, but triple it.
In general, people are unhappy to have something of value taken from them. The folks who have been putting together the Republican tax reform bill are considering reducing – or even eliminating – income tax deductions for such expanses as state and local taxes, mortgage interest, and medical costs.
To compensate, they offer to almost double the standard deductions for single and married taxpayers. But this will not mollify the millions of Americans whose taxes will go up substantially.
Instead, why not try an approach that contains more carrot and less stick? Don’t just double the standard deduction: triple it!
If you want to continue to itemize, feel free to do so. Maybe we could even put a few more caps on itemized deductions. But tens of millions of taxpayers will be induced to take the standard deduction.
If middle class Americans are truly being offered a large tax cut, then shouldn’t their taxes be reduced – not increased? And if we want real tax reform, then don’t we need to sharply reduce the number of taxpayers who itemize their deductions?
Tripling the standard deduction should be a no-brainer. You can induce a lot more people to do the right thing by handing them a carrot than by hitting them with a stick.
Will tripling the standard deduction raise the federal budget deficit? Of course. But it will not only be a tax cut directed at the middle class, but it will be a very tangible one. Taxpayers can easily calculate how much they’ll save on their taxes.
Raising the standard deduction will attain the same end as reducing deductions that are itemized. It will simplify our tax system. And it will leave in its wake a whole lot of happy campers.
It will also make for a lot more happy members of Congress, and greatly enhance the chances of passing a tax reform bill. Dozens of Republicans from high-tax states – and possibly even a handful of Democrats -- will consider no longer opposing the bill.
Despite all this wonderful advice, Congressional Republicans seem bound and determined to come up with a tax reform plan that mainly benefits the rich, while promising the world to everybody else. A tax reform plan that would actually benefit most taxpayers just makes too much sense.
About the Author
Steve Slavin has a PhD in economics from NYU, and taught for over thirty years at Brooklyn College, New York Institute of Technology, and New Jersey’s Union County College. He has written sixteen math and economics books including a widely used introductory economics textbook now in its eleventh edition (McGraw-Hill) and The Great American Economy (Prometheus Books) which was published in August.