Presently, an individual may claim a personal exemption and also an exemption deduction for each person he or she claims as a dependent on his or her federal income tax return. The amount of each of these exemption deductions was $3,700 in 2011 and $3,800 in 2012. So let's assume it is scheduled to be $3,900 in 2013.
Let's compare a Caucasian family with two children dependents living in the very wealthy suburb of Greenwich, CT, with both parents working on Wall Street and making more than $500,000 each, with a Latino family with two children dependents living in Santa Ana, CA, and the father works at Walmart and makes $18,000 per year, and the mother works at Costco and makes $40,000 per year.
The Greenwich family receives a tax benefit on their 2013 federal income tax return of $3,900 X 39.6% marginal income tax rate X 4 = $6,178, or $1,544 for each of their four exemptions.
The Santa Ana family receives a a tax benefit on their 2013 federal income tax return of $3,900 X 15% marginal income tax rate X 4 = $2,340, or $585 for each of their exemptions.
So the way I look at it is that in this specific example of two families on substantially different economic scales, the US Congress has made the determination, that from a rewarding of a tax benefit standpoint, that the white child living in Greenwich is worth to the country 2.64 times what the Latino child living in Santa Ana is worth.
There is something way wrong with this.
To correct for this tax policy legislated by the US Congress, which some could view as racist, and all would view as clearly biased
against all taxpayers trying to get into the middle class, both white and of color, I recommend that the US Congress fairly turn exemptions into a tax credit, with the tax benefit for each exemption being the same.
I would set as a goal a certain amount of Total Tax Revenues you want raised by the US Government on this issue.....and the Total Amount of Tax Revenues should be substantial, given the dire financial situation the country is in.
Then, I would set the exemption tax credit at a fair flat dollar amount per exemption, such that the desired amount of Total Tax Revenues raised by the US Government on this issue reaches the desired amount.
The end result would be a significant reduction of the tax benefit for exemptions for wealthy taxpayers and an increase in the tax benefit for exemptions for those significantly below the middle class.
So, in addition to wisely reducing the US Debt by a substantial amount, this recommendation will also reverse US Congressional action, sometimes done unintentionally, which has pretty much consistently resulted in legislation that has expanded the substantial wealth gap between the wealthy and every one else.
If you want to build the US middle class out, the above recommendation is a step that gets you there.
