What Is Behind The Standard Deduction, 26 United States Code 66

I wanted to learn how the standard deduction is calculated. When i looked up statute 26USC63, it appears the deduction is simply an arbitrary amount with no mathematical basis. I would have thought, because the standard deduction substitutes for itemized deductions, that it represented some average deduction amount or similar. However, the law does not describe how or from where the standard deduction is derived. What makes things even more odd is that the standard deduction does not change with income. Whether you make $1K or $100K, it is the same. Is there another information source that details what is behind the standard deduction, or is 26USC66 it?

26USC66

(c) Standard deduction
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2 (a)),
(B) $4,400 in the case of a head of household (as defined in section 2 (b)), or
(C) $3,000 in any other case.

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Quoting head-scratcher

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I wanted to learn how the standard deduction is calculated. When i looked up statute 26USC63, it appears the deduction is simply an arbitrary amount with no mathematical basis. I would have thought, because the standard deduction substitutes for itemized deductions, that it represented some average deduction amount or similar. However, the law does not describe how or from where the standard deduction is derived. What makes things even more odd is that the standard deduction does not change with income. Whether you make $1K or $100K, it is the same. Is there another information source that details what is behind the standard deduction, or is 26USC66 it?

26USC66

(c) Standard deduction
(2) Basic standard deduction
For purposes of paragraph (1), the basic standard deduction is—
(A) 200 percent of the dollar amount in effect under subparagraph (C) for the taxable year in the case of—
(i) a joint return, or
(ii) a surviving spouse (as defined in section 2 (a)),
(B) $4,400 in the case of a head of household (as defined in section 2 (b)), or
(C) $3,000 in any other case.

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The standard deduction was set a very very long time ago, and obviously some sort of calculation was used to determine the original standard deduction. Since then, it has been indexed for inflation.

Before dismissing with a "obviously some sort of calculation was used", i would like to verify the factual basis for the standard deduction. If it has no factual basis, then it is arbitrary, meaning the law is arbitrary. That has implications since so many people rely on the standard deduction.

Unlike other items in the tax code, the standard deduction has neither a mathematical formula nor explanation of how it is derived. We know what the standard deduction is not. It is not proportional to income. Regardless of what income amount you have, the standard deductions remains the same. It is also not representative of an average deduction amount. If it did, it would have changed over time as tax laws change, not merely be determined once and forever 50+ years ago.

So we have this mystery amount, probably about $130 in 1933 dollars, that no one knows how it was derived? We are talking about thousands of CPAs and tax lawyers who have accepted this statute on blind faith? Because "obviously" it would not have been put into law if it was arbitrary? How much law has Congress passed that has been arbitrary? The list is very long.

So what are the implications if the standard deduction is arbitrary? What else about the tax law is arbitrary? And how many people are affected?

Just curious. Are you writing a college paper or something?

Overall taxable income thresholds tend to track pretty closely the federal poverty thresholds(not the guidelines) established by the Census Bureau. There's no direct linking, but it's obvious if you study the numbers there has been a loose, unofficial link established. Consider not just the standard deduction, but also the personal exemption and other deductions and tax credits. Generally, there has been a policy to exclude a certain baseline income(poverty threshold) from federal income taxation by using these measures. IRS, Census Bureau, and some thinktanks like Brookings and others may have publications on taxation history that can help you more.

I generally agree with 4eyedbuzzard's thinking. My understanding is that the standard deduction is often taken by individuals who are not living below the poverty level and do not take advantage of other deductions. Many people us the Form 1040EZ which excludes many of the deductions one can take. However, the standard deduction is offered.

If the standard deduction is arbitrary, this indicates that many taxpayers are probably paying more tax than they are obligated to. See my next post on taxing labor for a possible basis for this speculation. It raises the question: cui bono? The government benefits from more taxes. It has a lot of bank loans to pay off. But the government would be breaching agent and committing fraud by tricking people to pay more taxes. Right?

I am not a law student. Law students are very "status quo". Because of my observation that people generally believe what they are told to believe, i no longer accept what i am told at face value. I am researching corporation personhood and income tax right now.

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Quoting Dad2

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Just curious. Are you writing a college paper or something?

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Nope, I suspect that he is a tax protester.

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Quoting head-scratcher

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I generally agree with 4eyedbuzzard's thinking. My understanding is that the standard deduction is often taken by individuals who are not living below the poverty level and do not take advantage of other deductions. Many people us the Form 1040EZ which excludes many of the deductions one can take. However, the standard deduction is offered.

If the standard deduction is arbitrary, this indicates that many taxpayers are probably paying more tax than they are obligated to. See my next post on taxing labor for a possible basis for this speculation. It raises the question: cui bono? The government benefits from more taxes. It has a lot of bank loans to pay off. But the government would be breaching agent and committing fraud by tricking people to pay more taxes. Right?

I am not a law student. Law students are very "status quo". Because of my observation that people generally believe what they are told to believe, i no longer accept what i am told at face value. I am researching corporation personhood and income tax right now.

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If, by the offchance, you are not a tax protester, then go take a look at a Schedule A, and see the types of things that are permitted to be deducted if someone opts to itemize their deductions rather than taking the standard deduction. (Its one or the other, either you itemize deductions on schedule A, or you take the standard deduction)

Basically, everyone gets a standard deduction, unless their specific expenses are higher than the standard deduction, and then they are permitted to itemize instead.

Maybe the original calculation is not readily available on the net, but the purpose behind the standard deduction is fair, because EVERYONE gets its, and EVERYONE is permitted to itemize if that will give them a higher deduction than the standard deduction.

So therefore yes, it IS proportional to income, because those people with higher incomes will opt to itemize their deductions rather than taking the standard deduction.

Tax protestor? I think we are all tax "protestors". Maybe you are the first one, but i have yet to meet someone who likes to pay taxes.

So far, no one knows much about this standard deduction. I find it odd that those who make a livlihood being a tax lawyer of CPA have not bothered to scrutinize this money figure. I have read that this deduction was introduced in 1944 under the Individual Income Tax Act. It would be nice to get hold of the original text of this act. Perhaps it details how the standard deduction was derived. If not, then the money figure must be accepted as arbitrary.

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Quoting head-scratcher

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Tax protestor? I think we are all tax "protestors". Maybe you are the first one, but i have yet to meet someone who likes to pay taxes.

So far, no one knows much about this standard deduction. I find it odd that those who make a livlihood being a tax lawyer of CPA have not bothered to scrutinize this money figure. I have read that this deduction was introduced in 1944 under the Individual Income Tax Act. It would be nice to get hold of the original text of this act. Perhaps it details how the standard deduction was derived. If not, then the money figure must be accepted as arbitrary.

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Why is this a problem for you? There are many deductions and credits that people receive that could be considered to be "arbitrary" under that argument. In fact, any law that passes, in any area of law can be considered to be "arbitrary" under that argument. Laws are made by legislative bodies deciding that something should be a law, as long as that law doesn't violate the applicable state, or federal constitution.

No, I am not concerned at all about the standard deduction, nor do I care how it was original derived. I do not care because everyone gets it, and because those with higher expenses in those catagories, may elect to itemize instead, and even more so, I do not care because it is indexed for inflation, and therefore increases every year.

If it was not indexed for inflation, or was denied to some class of American citizens, or people with higher expenses were not allowed to itemize, then perhaps I would care.

Head scratcher, found a link for you that may be of help in your research.
http://205.212.176.225/sourcebook/statutes-code.htm