TRA86 ... Ask TaxMama ... July 2, 2004

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Published by Eva Rosenberg, MBA, EA
Volume 6, Issue 265 July 2, 2004


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TRA86

Recently, David asked what I thought about Reagan's tax bill.

Raymond Martin E.A. from Sacramento, CA. has some comments:

Hi David,

As a tax preparer that started my practice in 1986, let me add some items that Eva forgot to mention. She is a wonderful person to deal with on tax issues, but it is clear that in her first paragraph to you that any cut in a government program is a tragic event. And she did wonderfully in College even with the cut in the State Scholarship. You are reading her website aren’t you?

Her points about the act being AWFUL are enlightening. It was viewed by many in the tax preparer arena as the Taxpreparer’s Retirement Act and all of us spent many hours in continuing education to learn the ‘new rules’. As a new preparer I was excited that things were not boring.

However, Eva forgot to mention the most important part. If you think back, President Reagan was working with a Democratic House and Senate that did not want ‘the rich’ to get tax benefits. Because of this, all of the items that Eva mentions were targeted to reduce the benefits of the tax bill on 'rich people'. However, as she mentions it backfired for the elderly and increased taxes for people that do not know how to handle credit cards. But the question remains today, why should people get a deduction for personal interest anyway? I do think they should get their deduction for sales taxes paid. Isn't that a tax on a tax? But I digress.

Now, the biggest item on which President Reagan should be commended is his push to deduce the personal rates which were well above 50% to two much lower rates of 15% and 28%. Whether this was accomplished in 1986 or 1982, I do not remember but it was not liked by many of the more liberal Democrats at that time.

Don’t get me wrong. I fully agree with Eva that the tax code should be made simpler, not that it was really simple even before the 1986 changes. In fact, in the near future, there will be many taxpayers in states across the country who will begin to prepare there own returns using home computer programs because they will no longer be able to itemize their deductions since the standard deduction is increasing so much (this probably won’t affect California homeowners much).

Finally David, I want you to remember, that when you hear the term, “targeted tax cuts”, those proponents are not looking to help Eva simplify the IRS Code. David, I am glad you asked.

Raymond Martin, E.A.
Sacramento, CA.

Hi Ray,

Great to hear from you!

And thank you for re-opening this because there WAS something I wanted to add:

Reagan was responsible for persuading the Russians to bring down the Berlin Wall. Now, considering that at the time, the Russians were really in a superior position (but in really poor shape economically), that was quite some feat.

You make excellent points, Ray.

As it happens, right before that tax bill was written, Senator Alan Cranston (Remember that guy? He had to be 100 years old)was traveling around California, meeting with panels consisting of a cross-section of people to discuss what would be in the new tax act. I suppose it was because I had just released my first book, The Tax Anxiety Xperience. that year.

I was invited to be a member of the Orange County panel. (In fact, the Orange County register singled out something I said and put it into a prominent box with their article - I am sure I have that yellowed clipping somewhere ...)

I went to meet Cranston armed with material to present my case for a flat tax. Which I did. But I also listened to all the other people presenting their demands to him. Those representing the poor - and how much they needed help and special benefits because the tax burden was so heavy on them; the corporations who pointed out that they've been invited to move their entire operation to countries, like Ireland, where they could pay no taxes and get free land, and perhaps even have the country subsidize their plant - the Irish wanted jobs so desperately. Cranston was facing a lot of valid, sensible points made by people. I could see how hard it was going to be to write the law.

Only, I didn't expect any law to pass that didn't include provisions for existing contracts to be grandfathered (installment sales). Or at least to provide a 5 year window to revise them (like they did phasing out personal interest).

Just some memories about those years ....

Best wishes,

Eva Rosenberg
Your TaxMama

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