Wyden's 1040

Today's the deadline for mailing personal tax returns. If you're like most Americans, you procrastinated until the last minute - and either fought your way through the tax forms, paid someone to do it for you, or paid for software (or a website) to do it for you.

Senator Ron Wyden has proposed an overhaul of the tax code - eliminating most credits and deductions, raising taxes on the super-rich, and providing middle class tax cuts. A centerpiece of the program is a one-page 1040 tax form.

Check out Wyden's 1040 tax form here (pdf). More from his US Senate website.

Read earlier BlueOregon coverage of Wyden's tax plan here:
Steve Novick: Wyden's Bold Move
In the News: David Broder on Wyden's Tax Plan

Discuss.

Comments

  • dd (unverified)
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    Why favor married people? If he's interested in fairness in the tax system, he should support taxing all households equally.

  • Jesse O (unverified)
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    Still giving homeowners tax breaks? Another regressive -- and complicated -- piece of the tax system. Ditch it!

  • mrfearless47 (unverified)
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    Wyden's proposal is intriquing. I still think the marginal rates are too high, although I don't know the levels at which they kick in. I just sent in a check for $10,550 to the IRS today, of which $6800 was AMT - the 7th year in a row that s.o.b. tax bit us. We're among the working schmucks who derive virtually all our income from W-2 forms. Our "investment" income amounts to only about 5% of our taxable income. So, while we may be "rich" by many people's standards, we still fall into the "working class" and feel utterly slammed by the current tax structure. Between the Federal, State, Social Security, Medicare, Property, and I-Tax, nearly 50 cents of every dollar we earn is taxed. So much for "tax breaks" for the "rich". It is tax-breaks for the investment and stock option class, not for the "working" class. If Wyden's proposal gives us true tax relief, we'd be all for it.

  • colorless green ideas (unverified)
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    the homeowners mortgage interest deduction is surely one of the most abused deductions. sure it "helps" people afford homes, but mostly it helps home sellers make more off their house, and lenders make more money off bigger loans. many homeowners do not even qualify for the write off because their interest isn't high enough!

    that said, in our world of asset bubbles, and creative financing, eliminating that deduction would be devastating for too many people. even if it were phased out with a revenue neutral shift (a general lowering of the income tax), homeowners would cry foul because it could make their homes worth less than their loans, which would also require them to purchase mortgage insurance. this makes them unable to sell without a loss, and raises their monthly costs--not a good combo. i think the best we could do is eliminate the deduction for 2nd homes, and lower the cap on deductable interest.

  • (Show?)

    Hmmm.....

    As much as I love Senator Wyden, this form seems more like salesmanship than a solid policy proposal. To get everything to fit onto one page, he crams all "income" on to a single line, ignoring all the calculations necessary to get to that number.

    I'm not sure that really helps. Most reasonably intelligent people can understand a 1040A or 1040EZ. It's figuring out the "Form 8825" Rental/Royalty Income you need to pay for the three meager rents you got for your ski condo, and what expenses do or don't qualify for a deduction, and by how much, and what can be depreciated, and what method is allowed - straight line? 150% declining balance? closing costs?! differing cost basis?!? passive activity?!?!? de-minimus original issue discount?!?!?!? ALL FOR A FRICKEN $18 DOLLAR DIFFERENCE WHEN YOU'VE FINALLY FILLED OUT THE FORMS. (The above situation is purely for example, I assure you.)

    Nor do any of the "fair" or "flat" taxes address this issue. The tricky part of Income Taxes isn't figuring the percentage at the end. It's figuring out what qualifies as "income" (gross proceeds minus legitimate costs sure - but what costs are legitimate? And when can you take them?) Apportionment between States. (Heaven help you if that Ski Condo you've got is in Colorado.)

    I have no doubt that Senator Wyden means well, and his tax system is no doubt much more fair than both our existing system and all the usual Republican alternatives that are continually floated. But the simple truth is that there is no way to appreciably simplify taxes. Not unless you want to remove the last bit of progressivity in the system that keeps this country from becoming a third-world plutocracy.

  • (Show?)

    Just because I'm feeling spunky this morning, I'll mention for the record that I had my federal refund direct-deposited into my checking account by Feb 15. :)

    But I'd love for Wyden's proposal to get a full hearing in January 2007!

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    Wyden's plan doesn't do anything to address the mounting national debt. The $100 billion in deficit reduction he proposes takes place over 5 years. When the debt's increasing at a rate of something like $400 billion/year, an average annual reduction of $20 billion means that if this plan was enacted tomorrow, the debt (the limit for which was recently raised to $9 trillion) is still going to increase to about $11,000,000,000,000. That just kicks the fiscal ball down the road another half decade.

  • mrfearless47 (unverified)
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    darrelplant writes:

    "Wyden's plan doesn't do anything to address the mounting national debt. The $100 billion in deficit reduction he proposes takes place over 5 years. When the debt's increasing at a rate of something like $400 billion/year, an average annual reduction of $20 billion means that if this plan was enacted tomorrow, the debt (the limit for which was recently raised to $9 trillion) is still going to increase to about $11,000,000,000,000. That just kicks the fiscal ball down the road another half decade."

    So what's your proposal? Eliminate all deductions? Raise the effective marginal tax rate even higher? What? Instead of criticizing Wyden's proposal, offer a competing alternative that simultaneously addresses flattening the tax code, reducing the deficit, and reducing the national debt.

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    Why does the tax code need to be flattened? Is there some inherent benefit to flatness? I can't think of any, except as a marketing trick. Simplified, sure, but why flattened?

    I don't have to offer an alternative to Wyden's proposal that flattens the tax code, reduces the deficit, and reduces the debt, because quite frankly, Wyden's plan only really does the first of those three things. The deficit reduction he's proposing is about 4%, and is well within a margin of error for calculating the budget. His plan doesn't reduce the debt at all.

    How about being realistic with the American people about the fiscal mess the Republicans have gotten us into? How about telling them that George Bush and his cronies have dug a hole so deep that it needs to be addressed immediately and that the income tax brackets need to be rolled back to the far more progressive levels of the pre-Reagan era? And that the balance of revenue between corporate and personal income taxes should go back to those levels as well?

    Some Republican could come up with a plan virtually identical to Wyden's and promise $50 billion in deficit reduction a year. It could be just as flat, and it would have two-and-a-half times the deficit reduction Wyden's plan has. But it would still do virtually nothing, given the size of the national debt. And I'd oppose that as window dressing, too.

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    Yeah! That's right! A proposal that doesn't do enough should be rejected in favor of doing nothing! Yeah!

  • dd (unverified)
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    mr. fearless writes: Instead of criticizing Wyden's proposal, offer a competing alternative that simultaneously addresses flattening the tax code, reducing the deficit, and reducing the national debt.

    If one is running for office, there's an expectation that any criticism of one's opponent will be followed up by an alternative plan.

    It's becoming commonplace however to respond to someone's criticism of a politician by a constituent just as you have here mr. fearless: with outrage that no competing plan has been offered. Why have we gotten to this place? It ends the discussion without any discussion having taken place and it should be enough to say an idea is misguided, misplaced, or just plain wrong.

    If a book reviewer criticizes a new book, should that person have to lay out how the book would have been better written? Should a movie critic have to come up with a better plot? If I don't like President Bush's handling of Iraq do I have to come up with my own plan for dealing with such an evil bastard as Saddam Hussein, or is it enough to critize Mr. Bush and let him know where I disagree with his ideas?

  • djk (unverified)
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    Like darrelplant, I was also disappointed Wyden's wimpy approach to the deficit. $100 billion over five years is chicken feed. I'm guessing Wyden capped the tax rate at 35% for political reasons -- maybe he figured 40% (as in a 10-20-30-40 system) would be "too high" to get through Congress.

    I'd be curious, though: what if he added a 45% bracket that affected the top 1% of taxpayers? (It could be indexed every year to ensure that no more than 1% fall within that bracket.) Would that bring in enough to balance the budget and start paying down the national debt?

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    Kari, a tax plan that reduces the deficit by $20 billion dollars a year is a plan that does nothing, essentially. That's my whole problem with Wyden's bill. They're running through that much in Iraq every couple months.

  • mrfearless47 (unverified)
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    darrellplant opines:

    "Some Republican could come up with a plan virtually identical to Wyden's and promise $50 billion in deficit reduction a year. It could be just as flat, and it would have two-and-a-half times the deficit reduction Wyden's plan has. But it would still do virtually nothing, given the size of the national debt. And I'd oppose that as window dressing, too."

    When was the last time we had no national debt, as opposed to a budget deficit? No tax reform that has a snowball in hell's chance of getting by any administration (democrat, republican, or independent) if the focus is on reducing the national DEBT. The rates would have to be close to 70% at the highest levels and return to Eisenhower levels to see that kind of government revenue. And imagine what impact that would have on the overall economy. Forget about the national debt; worry about the deficit. Forget about taxing the upper 5% - 1% equally; all income is not "earned" equally. Some of us actually work very hard for ours, while others are rewarded for incompetence (corporate CEOs), had the good fortune of inheriting wealth, or been part of a firm that pays in stock options instead of cash.

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    And as I remember, I didn't advocate "doing nothing". I suggested that perhaps a return to the tax policies of the pre-Reagan tax cuts might be a better choice. I guess you skipped over that paragraph.

    Heck, I'd have been happy if Wyden had advocated a return to the Clinton era of balanced budgets. That, at least, would halt the increasing debt.

    Fiddling with the way taxes are collected without addressing the problem that too few taxes are collected to balance expenditures, though? That's just fiscally irresponsible, and I can just see Republicans calling it that even if they supported Bush's reckless deficit spending. IOKIYAR.

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    Kari, a tax plan that reduces the deficit by $20 billion dollars a year is a plan that does nothing...

    Everett Dirksen once said, "A billion here and a billion there, and pretty soon you're talking about real money."

    Setting aside the question of whether $20 billion a year is real money, Wyden's plan isn't JUST a deficit reduction plan.

    It also shifts the tax burden from the working poor and middle class to upper-income earners. It taxes investment income the same as wages and salaries. In other words, Paris Hilton will pay the same (or higher) rate on her income as a desk clerk at the Portland Hilton. It simplifies the mechanical act of paying one's taxes (freeing up billions of dollars that could be spent on productive work, and is now spent on the form-filling-out industry.) And it eliminates many deductions and credits, which are the lifeblood of the lobbyist class on Capitol Hill.

    It seems to me that even if it was revenue-neutral (which it isn't) it would be worth doing anyway.

    [Full disclosure: I built Wyden's campaign website, and interned for him back in '93, but I don't speak for the Senator or his staff.]

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    darrellplant's point is all well-and-good, but Wyden' hasn't heavily promoted his tax plan as a tool to reduce the federal debt. He mentioned it as more of a side benefit in a speech that he gave to Cleveland's City Club, but he's clearly focussed on reducing the inequities of the current tax structure which reward those who earn a bulk of their income from investments, and it appears to be intended to give increased disposable income to those making less than $150,000.

    One thing worth noting about Wyden's plan is this: It's loosely based on a plan that passed with bi-partisan support in Utah. I've been talking about introducing legislation for a similar tax structure in Oregon since December of 2005 when I spent some time with folks who were involved with a Utah's legislation.

    The real benefits of the plan is that it dramatically simplifies the tax code and eliminates many of the inequalities that are built into the current federal system. Oregon would benefit from at least looking into a similar plan.

  • Steve Bucknum (unverified)
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    Overall I think Wyden's plan is probably a good thing.

    But, it lacks detail. I know, I know, it has tons of details. But let me give you an example.

    I'm self employed, and use a Schedule C to figure gross income less expenses for net taxable. Wyden talks about eliminating loop holes, and cutting health care inefficiency. One of the deductions I have as a self-employed person is to write off my health insurance costs. -- I can't find reference as to whether that stays or goes. Oddly, in the entire plan it doesn't say whether Schedule C would still be used.

    I own rental real estate. I use Schedule E to report income and expenses to calculate my annual loss. Yep, I'm into subsidised housing out of my own pocket! Anyway, no word how this will be handled, whether it is considered a tax loophole, whether Schedule E will still be used or not. --

    Lots of questions. When I follow the website links to the actual language of the legislation, the answers just aren't there that I can find. -- If anyone can see the answers in all that stuff, please let me know!

    And again, oddly, when I was first exposed to the Flat Tax Plan months ago, I asked Wyden's staff to clarify these issues, and never got word one back.

    So, its a good idea, but like a lot of good ideas, the details are what is important.

    Until I hear more details, and get my questions answered, I can neither support nor dispute this plan. I can't even call it a plan yet - just an idea.

  • (Show?)

    No, Kari and sjp, you're right, Sen. Wyden's plan "isn't JUST a deficit reduction plan" nor has he promoted it "as a tool to reduce the federal debt".

    But he and Rep. Emanuel hope to make this plan the major tax reform measure of the Democratic party. It's a 5-year plan, which means that -- in the event that they somehow manage to get it through in the next year or so -- it's unlikely there will be any other major changes to the system until after the 2012 elections.

    The deficit reduction angle may have been slightly mentioned at the Cleveland City Club, but it was definitely given some attention in the phone conference I was in on back in November. Deficit reduction is mentioned as the final point in the one-page description of the FFT linked from Wyden's home page: "Additionally, as it increases compliance and uncovers savings, the Fair Flat Tax Act of 2005 will reduce the deficit by approximately $100 billion during the next five years." A variation of that line is at the end of the first paragraph of the joint Wyden/Emanuel news release from December 15. I don't know, maybe he's backpedaling off of that point, but it was prominently featured in the material I've seen to date.

    Wyden's top tax rate is 35%. Why is that? Until the 1960s -- what the Republican's view as a "golden era" -- the top rate was over 50%. It didn't go below 40% until the mid-1980s. If Wyden wants to right inequities, I'm all for it, but a huge burden was shifted from the wealthy to the middle class in the 1980s. Wyden's plan doesn't seem to address that shift any more than it does the realities of the national debt. A billion here, a billion there? Imagine the billions between 35% and 50%.

  • (Show?)

    I'm no tax expert, but it seems to me that the working poor and middle class take very few credits and deductions (other than the home mortgage and per-child deduction), while the wealthy take quite a few. If you eliminate the deductions and credits, you get a much more progressive income tax...

    That, and taxing investment income the same as wages and salaries.

    As for a 40-50% top rate... even if you believe in that, incremental change is key. Democrats need wins to create momentum.

  • Steve (unverified)
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    "When was the last time we had no national debt, as opposed to a budget deficit?"

    I thought Clinton had a couple of years without a debt early in his presidency.

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    Why is incremental change key? Reagan believed in massive tax cuts for the wealthy and dropped the top rate 10% in one year.

    Wyden's plan would be fine if he was proposing it as a revamping of the tax system in the years immediately following the Clinton balanced budget era. But by cutting taxes on the wealthy and spending far more than they bring in for the past five years, the Republicans in control of the country have dug a huge hole that we need to get out of. That needs to be addressed as a part of any serious tax reform package in the next couple of years.

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    Steve, there has always been a national debt. Most likely, there will always be a national debt. But that doesn't mean that the US should continue to rack up half a trillion dollars in debt a year as we've been doing under Bush. If you think that his spending and taxation policies have been insane -- as I do -- then you can hardly support a tax plan that barely touches the brake on increasing the debt.

  • mrfearless47 (unverified)
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    "I thought Clinton had a couple of years without a debt early in his presidency."

    No, this is a common confusion between the national debt versus the budget deficit. Clinton brought us a budget surplus, which has the side effect of reducing the national debt nominally. But as far as I know, the National Debt has been building since at least the Civil War, perhaps longer than that. There is no way that the national debt could be erased or even significantly reduced by any tax increase proposal that anyone could propose. I suppose it could be reduced by simply sending all one's income directly to the government, but I don't think anyone's about to suggest that as "tax reform".

  • (Show?)

    Senate Minority Leader Harry Reid (D-NV) this morning (via Firedoglake):

    "President Bush Turned Record Budget Surpluses into Record Deficits and Debt. When President Bush took office, he inherited a unified budget surplus of $236 billion, the largest in American history, and surpluses were projected for years to come. These surpluses quickly disappeared under the weight of his budget busting tax cuts. By 2002 the unified budget deficit was $158 billion. Last year, the deficit reached $318 billion, higher than in any year before President Bush took office, and is likely to grow to well over $350 billion this year. When President Bush took office, the total national debt was $5.7 trillion. The Bush Administration was forced to ask Congress to raise the debt limit four times, most recently to a limit of almost $9 trillion."

    Maybe some people don't see burgeoning debt as a problem, but it seems that Sen. Reid does.

  • mrfearless47 (unverified)
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    darrellplant remarks:

    "But by cutting taxes on the wealthy and spending far more than they bring in for the past five years, the Republicans in control of the country have dug a huge hole that we need to get out of."

    I won't dispute anything you've said here, but as a non-Republican in a two-income family that is doing well by most criteria, I challenge you to show me how Bush's "cutting taxes on the wealthy" has benefitted me. This is a very common misperception that exists, especially among liberal and progressive bloggers and repeated ad nauseum by nearly every Democrat running for office. During Bush's administration our family income has increased by approximately 14%. In that same time period, our gross income tax bill has risen by nearly 30%, just at the federal level. What Bush's tax cuts did was to place a taxing premium on earned income, driving more and more people into the AMT hell, and negating any possible benefit that the tax cuts were intended to bring. Because of multiple surgeries, my wife's income has decreased substantially over the past 3 years. Her 2005 income was nearly 30% less than her 2004 income; my income was, to the penny, identical in 2004 and 2005. The only difference between 2004 and 2005 was a small increase in the amount of investment earnings we had - we had approximately $4500 in taxable earnings in 2004 and about $6000 in taxable earnings in 2005. The net result was that our 2005 taxable income was about 27% less than than our 2004 net income. Yet, with Bush's tax "cuts", our tax bill was $7000 higher in 2005 than it was in 2004. We had no underwithholding penalty and we paid quarterly estimated taxes. Our deductions were slightly less in 2005 than in 2004. We fall in the upper 5% of wage earners in the country; perhaps in the upper 2%. But, because virtually all our income derives from W-2 forms and not from Schedule D, we pay one hell of lot in taxes - much more than we paid BEFORE Bush's tax cuts for the "wealthy".

    I get very tired of the broad brush used to characterize the "wealthy". We are just as "working class" as any other people the Democrats try to lay claim to as their constituency. But whenever I hear a liberal or a progressive start talking about the "big giveaway" to "the wealthy", my skin begins to crawl and my blood pressure rises.

    One of the reasons that Wyden's proposal intrigues me is that it no longer makes a distinction between different categories of income. I'm not looking for any tax break, but I am looking for tax fairness. I pay what I consider to be far more than my fair share of taxes; it is the superaffluent who's annual wealth comes from stock options, from investment earnings, or from the proceeds of inherited wealth - among many others - who are not contributing equitably to the tax system.

    If you want to make my skin crawl or my blood boil, suggest I'm not paying my fair share of taxes. It might lead to an ugly confrontation with me being forced to show you just much I DO pay and then let you decide whether I'm a slacker or a republican bootlicker. I promise you that you'll be stopped dead in your tracks when you see my tax bill - and the tax bills of a lot of other very hard-working people whose "wealth" comes the old-fashioned way, by working really hard and really long hours.

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    Unless you're making more than a million dollars a year in income -- which seems unlikely if you're getting it through W-2s -- you're upper middle-class, not wealthy, and certainly not in the category of the people who benefitted from the types of tax cuts enacted by Bush in his first term. In 1995, the cutoff for the top 5% of income was $244K; for the top 1% it was $660K (that's $312K and $846K in today's dollars, although the income distribution may have shifted somewhat).

    Threating someone with an "ugly confrontation" is a pretty poor way to convince them of anything. Drop the hyperbole. You can show me your taxes, they won't stop me dead. They don't matter to me; I never claimed that you were a "bootlicker". The reason your skin crawls and your blood pressure rises (or boils) has more to do with you than with me.

    I don't think you're any more or less hard-working than people who make a lot less than you do, because I don't believe that because someone has more money they're worked harder. Lots of people work hard and don't make much money. Lots of people work long hours and don't make much money.

  • mrfearless47 (unverified)
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    I agree with your income level reports in your post. Now show me where any progressive or liberal blogger, or any recent democratic candidate for any significant office has made the income levels you describe a significant part of any tax reform proposal (other than to raise the taxes on those folks again). Let's take the presidential primary candidates for 2004. Did any of them propose rolling back the tax cuts for people reporting income in the upper 1% only. No! The generally accepted arbitrary figure for "wealthy" has been for the past 5 years, about $200,000. In Wyden's proposal the point typically mentioned is $150,000. My blood boils whenever people toss around the word "wealthy" without defining what it is. You've suggested a 45% rate for people in the upper 1%, but if you make no distinctions about the source of the income then a 35% rate applied to the upper 5% of income earners (regardless of the source of income) makes the truly wealthy (upper 0.5% pay one hell of lot more than they're paying now. You'll hear howls of pain from them about confiscatory tax rates, but you won't hear complaints from me). I have no problem paying my fair share, but when people like Bill Gates or Phil Knight or Neil Goldschmidt (in his heyday) pay a LOWER marginal tax rate than I do, it royally pisses me off. Worse still, when I get lumped together with people like that for the purposes of scurrilous accusations that I don't pay my fair share, my blood does boil. I've not accused you specifically of anything except your use of the term "wealthy" (until your last post) without any definition. It's a word devoid of any meaning except perhaps "anyone who makes more than someone else does". I'm going to continue to hammer away at anyone who alleges that Reagan or Bush gave me anything. Ironically, the Clinton tax increases cost me less than the Bush tax cuts. Go figure.

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