A Different Slant on Tax Reform.

• Author: HOAG, JOHN
• Position: Brief Article

As Congress ponders how best to align President Bush's tax plan with their own interests, I'd like to offer my short list for tax reform. Although the measures now before Congress are touted as vital to our economic and fiscal well-being, the ever-elusive goals of fairness, logic and simplicity seem to be off-topic for our legislators.

Phaseouts of All Types Generally Stink: They create a false impression and false hope in most cases. For example, what percentage of taxpayers actually benefit from the Hope Scholarship Credit? With tuition costs ranging from $12,000 to $25,000 or more per year, the potential $1,500 credit hardly makes a dent. Adding insult to injury, the credit starts being phased out at $40,000 and is completely gone at $50,000 of ACI ($80,000 to $100,000 on a joint return). Thus, to qualify for the full credit, you could earn up to $40,000; spend anywhere from 30 percent to 60 percent of your income for tuition; and pay for food, lodging and all other living expenses with the remainder, after paying, of course, $5,727 in income taxes. (Where you find time to earn $40,000 per year is another matter.) That anyone would actually yield the full credit is very unlikely. They should rename this the "False Hope Credit."

AMT Definitely Has To Go: This abomination is an insult to taxpayers' intelligence, and why we have put up with this nonsense is mystifying. The notion that a "side-by-side" tax computation method is necessary, just in case someone doesn't pay enough taxes the regular way, is absurd. The kicker is the added layer of complexity that this body of law adds to the tax computation process. AMT loses on all counts.

Index Everything: There is plenty of uncertainty about our economy and inflation. Since the cumulative effect of even small annual inflationary increases can be significant over time, there is no time like the present to ensure that tomorrow's taxpayers do not pay proportionately more in taxes simply based on inflation.

California NOLs: Give businesses full (not halt) credit for net operating losses. What is the logic for limiting the amount? Is this on the theory that "half a loaf is better than none?"

Eliminate California's Minimum Tax for Corporations: This creates a quagmire of potential interest and penalties for no good reason. If you need a "base" amount on which to run the system, call it a registration fee, but don't tie it to the income tax return.

California Conform: California needs true (and...