We can eliminate more than half the annual federal deficit overnight.
The Congressional Joint Committee on Taxation (JCT) recently released an annual report detailing foregone federal tax revenues (tax expenditures) due to income tax deductions.
Income tax deductions reduce the tax base or taxable income. As a result, lower tax revenue is realized.
This report is submitted to the following Congressional committees:
1. House of Representatives
a. Ways and Means
According to the JCT report, income tax deductions reduced annual federal tax revenues by $1 trillion.
Removing these deductions would increase revenue and reduce the annual federal deficit by $1 trillion, from $1.3 trillion to $300 billion.
According to the Department of Health and Human Services, subsistence poverty level income for a household of three in 2011 was approximately $20,000.
Excluding this level of subsistence income from taxation would increase the deficit by $200 billion, from $300 billion to $500 billion.
This represents a 62 percent decline from the original $1.3 trillion deficit.
1. Income exclusion = $20,000 per household of three
2. Total households = 100 million (total population = 308 million)
3. Total income exempt = $2,000 billion ($20,000 multiplied by 100 million)
4. Total revenue reduction = $200 billion ($2,000 multiplied by 10 percent federal tax rate)
5. Annual federal deficit reduced by 62 percent [ ($1,300 - $500) / $1,300 ]
In addition, we would save $400 billion in tax compliance costs, according to the Internal Revenue Service.
Simplifying the tax code could not be simpler.
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