Tax panel would slash deductions, cut rates:
[Reuters Busines Channel]
"Both plans would replace the current mortgage interest rate deduction, which taxpayers can claim on mortgage debt up to $1.1 million. Instead, the panel proposes a home credit equal to 15 percent of mortgage interest paid.
A credit is a dollar-for-dollar reduction in tax, while a deduction is an amount that reduces the income subject to tax."
I admit that when I hear the daily market report the S&P, Dow, and NASDAQ numbers don't make much sense to me. I also get that there are positive connotations to the notion of tax reform. However, none of the coverage I've read so far is very encouraging.
It would be helpful if someone would point out not just the differences such as one of the (rather objectionable) changes noted above. But also indicated how the basic formula has changed. Currently, the tax payer states income, subtracts deductions, and pays taxes on an adjusted gross income. Or they take their adjusted gross income and apply a standard deduction.
So far, I understand that the two proposals want to replace deductions with credits, but I haven't been told how that relates to a final tax table. Nor have I been told what the rationale is behind the two new plans. At least with the old plan, I understood that there were certain ways (incentives) in which you could spend or invest your money and this helped bring your tax liabilities down by adjusting your income. One of the major ways to do this was home ownership and the tax deductions of interest mortgage.
Why don't these business people simply give us everyday people some simple old way/new way numbers and examples to show how each system works and whether or not it looks promising. So far, it sounds like the beginnings of a failed ad campaign in the footsteps of the new old Coke is better.