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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.