Taxes That Work: A Simple American Plan

In November 2005, the President\u27s Advisory Panel on Tax Reform, appointed by President Bush to suggest options for reforming and simplifying the federal tax code, unanimously recommended two alternative plans: a simplified income tax (SIT) and a growth and investment tax (GIT). The two plans shared much in common. For example, both would: (1) Reduce the top marginal tax rate—to 33% under the SIT plan and 30% under GIT plan; (2) eliminate the alternative minimum tax (AMT); (3) replace the earned income tax credit (EITC) and refundable child credits with a work credit ; (4) replace personal exemptions, the standard deduction, and child tax credits with a family credit ; (5) eliminate all deductions for state and local taxes; (6) extend deductions for interest on home mortgages and charities to non-itemizers, but reduce deductible amounts; (7) cap the exclusion for employer-provided health insurance; and (8) expand and simplify tax-favored savings opportunities. In addition, the proposed SIT would eliminate tax on dividends distributed by U.S. corporations from U.S. earnings and would exempt 75% of capital gains on the sale of corporate stock; other dividends and capital gains would be taxed at standard rates