RE: Unfair Aspects in Current Tax System

A Letter I wrote To The President's Advisory Panel on Federal Tax Reform /Public Comments


RE: Unfair Aspects in Current Tax System

1. The Alternative Minimum Tax:
   Need we say more? All of the presumed tax cuts promised by this administration are whipped out and even replaced with a stealth tax increase for many middle class taxpayers, including ourselves. In the last few weeks I personally heard a lot of angry people who for the first time realized that they are subjected to the AMT. The AMT needs to be adjusted to inflation, and the unequal treatment of investment in capital and real-estate needs to be changed. Right now, middle-class people who typically have much of their modest wealth in real-estate, are penalized by the AMT since their property taxes are not deductible. Meanwhile, much wealthier tax payers enjoy very low tax rates on capital gains. This is very unfair.


2. Adverse Tax Consequences for Same-Sex Couples
   We are a same-sex couple with two children aged 4 (twins). We are both legal parents as we took advantage of second-parent adoption legislation in CT, where we resided at the time. Nevertheless our kids and us are still less protected and are unfairly treated in numerous ways, including the following examples:
   
   a. We are excluded from "surviving parent" benefits provided by Social Security to the parent caring for a minor child when the other parent dies, because it is only given to couples who are recognized as "spouses" under federal law, which same-sex couples are not. Even though the benefit is for children and not spouses, children being raised by same-sex couples are denied it because their parents cannot marry.
   
   b. Similarly, in case of need we will not receive survivors' benefits when one of us dies, even though we pay into Social Security on an equal basis with our heterosexual counterparts, nor will we be eligible for spouse's benefits when one of us becomes disabled.
   
   c. Tax treatment of retirement savings, such as those found in 401(k) plans, privileges spouses and penalizes same-sex couples. This means that on the death of one of us, the surviving partner is left not only with the same emotional loss that a different-sex spouse experiences, and the lack of Social Security survivor’s benefits, but also with an unfair tax bill.
   
   d. We own and share a house together. Different-sex spouses get a complete exemption from estate and gift taxes. But like all same-sex partners, even ones who are married in Massachusetts or parties to civil unions in Vermont, in case one of us dies, we will be are treated as strangers under the tax code. So when one of us dies, the other will have to pay taxes to be able to continue to live in our house.
   
   e. The inability to file taxes together may also, under certain circumstances, cause a couple to be subjected to the AMT on lower income levels compared to a couple who’s marriage is recognized by the Federal Government.
   


3. Progressive Taxation
   When considering a tax reform, we urge you not to use the excuse of “simplification” in order to increase the tax burden on lower and middle-class residents. It is widely recognized by experts that any shift to spending-based (as opposed to income-based) taxation will subject lower earning people to a larger share of the tax than the higher earning ones. Lower earning people always spend a higher proportion of their income than wealthier people – it is common sense too.
   


4. Low Emission (“Clean-Fuel”) Deductions
   This year we decided to by a hybrid car, and our decision was very much encouraged by the $2000 Federal tax deduction, and the NY tax credit provided to buyers of such cars. Please do not let this deduction to be phased out as planned – it is important for the sake of all of our children that many more people will drive vehicles that are less polluting!

We hope you will indeed read and take into account our comments,


Ron and Greg Poole-Dayan