CPAs might determine which clients are likely to benefit from early mortgage payoff by reviewing tax returns to identify marginal
itemizers. For example, taxpayers with excess itemized deductions of less than $1,000 for the past two or three years might be contacted to discuss strategies to address the diminishing tax benefits of itemizing.
The Panel believes that current law, with its arguably lavish provisions (multiple homes and million-dollar mortgages) that provide tax benefits disproportionately to high-income
itemizers, may have strayed from the original intent.
However, for some federal
itemizers, DC itemized deductions were less than the DC standard deduction in part because DC, like most states, does not allow taxpayers to claim a deduction for state income and sales taxes.
We separate
itemizers by income range and report each group's mean charitable giving as a share of after-tax income.
Scenario I maintains current law and allows only
itemizers to take advantage of the credit, while Scenario 2 extends the credit to the charitable donations by taxpayers who do not itemize deductions.
higher-income
itemizers tended to be more aware of the accurate tax
As the sample size is relatively modest and because these coefficients are statistically significant and larger with a different
itemizer assignment (see Appendix C), I do not discount these as essentially zero estimates.
Those States with relatively higher per capita incomes are also the States in which the proportion of
itemizers is relatively the highest.
While the response of
itemizers to tax price incentives has been well
For an
itemizer at the federal level, the tax price of a deductible tax is one minus the federal marginal tax rate.
Itemizers earning more than $150,000 increased their donation amounts collectively by 27 percent, or $6 million.
The IRS Statistics of Income data (see www.irs.gov) for 2003 (the most recent year available) indicate that only 33% of individual tax returns claimed itemized deductions, with 80% of
itemizers reporting AGIs over $50,000.
