Sarah, consider yourself warned. I'm about to talk taxes. On the other hand, I'll also be talking Fred Thompson so roll the dice and make your choice. :)
However, I'm not sure what to make of his tax plan yet. The idea of an optional pseudo-flat tax system (it's being called a flat tax, but my understanding is that there are actually two rates plus a capital gains rate) with very few deductions is interesting. However, unless this is a one time election, it won't make the tax system any less complicated.
If people have the option of using the simplified system every year, then it is in their best interest to calculate their tax under the regular method and the simplified system every year and pick which ever one comes out lower. If you go to a tax preparer, they'll do it for you. (Our software system is very capable of running this type of optimization.) A lot of the do-it yourself packages will be able to do the comparison too. However, you'd still have to know enough about the regular system to get all the information together. Otherwise, you'll always be wondering if you could have paid less under the other system.
Thompson proposes eliminating the Alternative Minimum Tax. I like this idea. The AMT is cumbersome and catches people unawares. It also tends to catch people who were never intended to have to pay the tax. (This was originally a tax aimed at insuring that the "rich" couldn't take so many credits and deductions that they'd pay no tax. Now it's hitting the middle class.) But one of the problems with the AMT is that it requires taxpayers to calculate their tax twice under two different systems.
If the opt-in system isn't a one-shot deal, then you're still left with having to compute your tax liability twice. On the other hand, if it is a one-time shot, people are going to pay a lot of money to accountants to try to guess which way is best for them over their WHOLE LIVES.
Overall the idea is interesting, but I'd have to see a lot more information to be sure I liked it. If I see more and think of it, I'll let you know what I think.
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