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What Americans Want from Tax Reforms

Over 90% of all American citizens want investments tasked as much as wages. That’s according to a survey conducted by WalletHub. This debate has even been brought up through the current presidential election debates that are taking place in the country.  Americans, it appears, want tax equality – and that means tax reforms.

Critics have argued that there’s worsening income equality under the last two administrations. This inequality has also been perceived through gender and marriage rights. Based on the WalletHub study that involved more than a thousand American taxpayers, below are the most common tax reform issues that people are interested in.

I. Equality before Economy

When asked what they thought was the most important among ‘tax fairness’, ‘tax equality’ and ‘what’s best for the economy’, most respondents in the survey placed economy at the end of their priority list. Over 60% said that they wanted tax fairness while about 20% placed a lot of prominence on tax equality. 18% thought that the economy was the priority issue. This perhaps wouldn’t have been the response a few years ago during the Great Recession, when a majority of Americans poured their hearts out to the economy.

II. More Simplicity with Fewer Deductions

Taxation is an expensive affair. In addition to the fact that about 31% of each American’s annual income goes to local, state and federal taxes, taxpayers spend billions (and a lot of time for that matter) trying to file returns and comply with tax regulations. That’s an additional cost that’s brought about by the complication of the tax code. Most Americans would wish that this code was less complicated. According to the WalletHub survey, more than 80% of the respondents think that the tax code has become ‘too complex’. This is compared to only 2% who think that it’s ‘simple’. Nearly half of polled respondents think that a simpler and fairer tax code would only have fewer deductions.

III.More Tax for Corporations

Wall Street vs Main Street – that’s a rivalry that has decorated the American taxation debate for years. Many taxpayers, it appears, were enraged by the government’s bailouts of major firms, including those that contributed to the recent recession. The fact that corporate profits have bounced much faster than household incomes typically ‘adds salt to the injury’. Some of the largest and most profitable American companies are parking overseas in order to avoid hefty taxation in the U.S. over 90% of respondents in the WalletHub survey said that investments should be tasked as much as wages are. This piece of information clearly highlights the current taxpayer sentiment.

IV. More Tax for Wealthy Americans

More Americans want a heavier tax burden imposed on the rich. In fact, most people would prefer a model where tax rates increased steadily based on income. This view has been held by American taxpayers for quite a long time, and it’s no surprise it’s brought up every time there’s a looming presidential election!

To sum it all up, American taxpayers really want Uncle Sam to view and treat all his children equally when it comes to paying taxes.

How the American Tax Code Favors the Rich

The American tax system favors the rich. Truly. According to massive economic experiments and studies on the impact of taxation, the general theory that guides tax-rate decisions is that ‘lower taxes attract more investment’, leading to more jobs and increased prosperity. As you file your next annual taxes, this article shows you exactly why the system is hijacked to favor the rich and super rich!

a)      Poor Americans Do Pay Taxes

There’s been a lot of media myth speculating that poor Americans don’t pay taxes. For instance, Fox News host Gretchen Carlson once said that ‘47% of Americans don’t pay any taxes’. Based on a fact-check ¬¬¬¬though, this is wrong. Indeed, poor Americans pay lots of taxes! Data obtained from the Tax Foundation reveals that back in 2008, the bottom half of taxpayers had an average income of $15,300. This amount was below the tax exemption threshold of about $9,000 for singles and $18,000 for married couples. Effectively, that means that this group didn’t pay any INCOME taxes. But they still paid a lot of other taxes, including sales taxes, gas taxes, utility taxes, federal payroll taxes, etc. Apparently, no American is tax-free.

b)     The Wealthiest Group Has a Lesser Burden

It’s true that the wealthiest 1% of wage earners pay about 40% of all federal income taxes. But people often forget that income tax is just a small fraction of the entire total taxation picture. The bottom 90% of wage earners are taking care of social security, unemployment insurance, and Medicare taxes. People who hit the $107,000 (roughly) tax mark are no longer required to pay more for social security. That means if you’re earning rounds off at this figure, you’ll be paying the same social security tax as Warren Buffet, Bill Gates, Mark Zuckerberg, and some other big-shot billionaires.

c)      The Wealthier you are, the Lesser Taxes

The richest 400 Americans pay less in taxes, despite massive incomes. This is so thanks to a number of loopholes in the system, allowable deductions and other instruments of exemption. According to the Internal Revenue Service, the actual share of their income, that’s paid in taxes is just 16.6%. The majority of not-so-rich Americans have a federal tax burden that’s more than 20%.

d)     A Good Proportion of the Richest Do Not Pay Any Taxes at All

Lots of the wealthiest people do live tax-free in America. Donald Trump’s tax records during his earlier career days suggest that he didn’t pay taxes for a couple of years. That’s because huge real-estate investors enjoy tax-free benefits following a 1993 law that was signed by President Clinton.

e)      The Story is the same for Corporations

The biggest corporations have a lesser tax burden, as compared to small, upcoming firms. This appears to be an increasingly common trend depicting the national tax picture!

Although a recent study revealed American taxpayer sentiment about this system that appears to favor the rich, it’s always the same story. Lower taxes for big earners! It’ll be interesting to see how the tax debate unfolds during the 2016 presidential election campaigns.

6 Things Every American Should Know About Taxes

Every day is a tax day in America. Yes, a lot of confusion with tax forms, quick trips to the mailbox, and a lot of headaches associated with keeping up with taxation requirements. Every American citizen is subject to local, state and federal taxation. Nonetheless, there’s still a huge group of people who do not know anything solid about taxes. Here are 6 things every American citizen should be aware of when it comes to taxation.

1.    Taxes are Expensive

According to research, taxes (at all levels), eat up about a quarter of the GDP (gross domestic product) every year. GDP refers to the entire total economic production value of a national annually. That’s about $4.8 trillion dollars. It’s no doubt not a trivial amount, and most informed taxpayers will understand this all too well. Based on information from the Tax Foundation, the average American citizen will work over three months each year to pay their share of taxes for the year. This means that up to 31% of all the money you make annually going to paying taxes. That’s a whole lot, you agree?

2.    Different States, Different Taxes

A significant proportion of American taxpayers still do not know that different states have different local and state codes. Each state and its local authorities will structure a tax system that’s best in line with its needs. States such as New York, California and Wisconsin have greater tax burdens as compared to others. For instance, the taxation level in New York is nearly double that in Wyoming. Just so you know, it helps to do a little research to determine whether you’re paying more in your state that other Americans are paying in their states!

3.    Government Doesn’t Collect Enough Money from Taxation

Although the American government and various local and federal authorities collect a significant proportion of the GDP in taxes, it’s just never enough. That means the federal spending is more than federal taxation. However, it’s important to note that in recent years, the federal spending levels have trickled down especially due to reforms in the budget. But the federal deficit is predicted to rise in the future decades, as a result of overspending. If you were perhaps wondering why the government owes China about $1.3 trillion, then you have your answer.

4.    Taxes Affect the Performance of the Economy

There’s no doubt that taxes affect the performance of the economy. Based on studies from multiple sources, there are proven negative effects of taxation on investment and economic growth. For instance, people often think about the tax rate when considering where to relocate their family or business. That means locations with seemingly ‘unattractive’ tax rates could lose potential investment opportunities.

5.    It’s Expensive to Comply with Taxation Requirements

Americans spend over $168 billion every year trying to file returns and comply with tax laws. And that’s before you even consider the money and time spent complying with local and federal taxes. The full cost of compliance for businesses and individual taxpayers is massive. Thus, tax compliance is a very expensive affair!

6.    Where Does All the Money Go to?

Over half of all money collected from taxation goes to Medicare and social security. About 19% goes to income security and other benefits while national defense soaks about a whopping 17%. The remaining percentage is divided up amongst other areas such as education, transportation, etc.

This article emphasizes how taxes impact on your savings, work and investment. It also highlights just how much of your money goes out to various authorities at the local, state and federal levels. It’s a great starting point especially if you’re looking to bolster your tax education.