Re: Last minute tax planning

Elizabeth Richardson wrote:
> "John H. Fisher" <[EMAIL PROTECTED]> wrote
> > year, the standard deduction is $4,750 for taxpayers filing as single or
> > married filing separately, $7,000 for individuals filing as head of
> household and $9,500 for taxpayers filing as married filing jointly.
>
> With the fixes to address inequities in the tax law, I find it interesting
> that US tax law still gives favorable tax treatment to single parent
> households over two parent households. How did this one slip by?

Arguably if it wasn't there, it would be an inequity. Why do we have 
standard deductions at all? I think the policy behind it that everyone 
needs a certain amount of money to get by, and the gov't doesn't assess 
tax on that slice, or some of it anyway (well except Social Security 
taxes but that's another discussion!). This is kind of the starting 
point of our progressive tax system, it doesn't start at $0 in income, 
but at the level of your deductions (an alternative might be doing away 
with all of these deductions).

That slice is let's say "X" for a single person. It's higher if they are 
"head of household" because by definition they have more costs to cover 
than a single person. If someone is married it's not 2X though, because 
the couple, we hope, lives together, and gains some dollars-in-pocket 
that have nothing to do with the tax code (car insurance, health 
insurance, one cable bill) and some that do (spousal IRA). And when we 
compare a household containing a married couple to a HoH-qualifying 
household...well I think in most cases the HoH-qualifying individual has 
a tougher go of it economically - they're supporting the other members 
of the household, not getting their support. True it allows deduction 
maximization for an HoH who doesn't marry their roommate, but two people 
doing that give up the rights and advantages that come with marriage. So 
maybe they get a bigger deduction, but they pay more in total to 
insurance, and it somewhat balances out.

I'm not saying that the fine members of our legislature actually think 
through this kind of stuff but that is at least a policy argument for 
having things like a "marriage penalty" and a HoH tax schedule that's 
structured as it is. Fortunately we can leave out of the discussion the 
issue of whether single parenting is or is not encouraged!

-Tad