What is the highest percentage of their income any person/family or business should have to pay in federal income taxes, and should anyone paying zero federal income tax be given a refund?
Paul Bremmer – Wash D.C., St. Bonaventure University 2012 Graduate, Bio – The U.S. income tax code is famously (or notoriously) progressive. Those who earn more money not only pay a higher dollar amount in taxes, but also a higher percentage of their income. But, there is a question as to how much is too much for someone to pay, no matter how fabulously wealthy they may be.
Currently, the highest tax bracket is 39.6%, for those who earn more than $406,750. However, that does not mean everyone in this bracket pays 39.6% of their income in taxes. The formula has earners paying $118,118.75 plus 39.6% of the amount earned over $406,750. The result is that many in this bracket actually pay less than 39.6 percent.
According to my calculations, someone who earned $406,751 – the very bottom of this bracket – would end up paying 29% of their income in taxes. From there, it gets more progressive. A person who earned $1 million would pay 35.3% of their income in taxes. Someone would have to earn $1 billion before they would pay roughly 39.6% of their taxable income.
It’s absurd to ask anyone to give nearly 40% of their income to the federal government. President Reagan was able to make a 28% top individual rate work, partly by limiting deductions and exemptions for the wealthy. I would suggest going back to a 28% rate.
As for those who pay no federal income tax, they should not get a refund. Tax refunds should be for those who already paid more than their share of taxes during the year. At a time of huge deficits and gargantuan national debt, our government can’t afford to be giving away money to people who didn’t pay any tax in the first place. This would be even truer if the government were to lower the top rate to 28%.
Arianna Mendez – FL, Florida International University 2014 Masters Degree, Bio – As “Tax Day” or April 15 IRS filing deadline is quickly approaching, this is a good time to discuss the intricacies of tax policy. In 2014, the IRS processed 132.5 million tax returns, and Americans received a total of $274 billion in refunds. On average, Americans will receive a tax refund of $2,863 each year.
In 1913, the 16th amendment to the United States Constitution, which allowed Congress to levy an income tax, was ratified. Since then, the debate on percentage of taxation has been a polemical issue in American politics.
Today, Democrats and Republicans continue to differ on what is the most appropriate tax rate to increase economic growth. Democratic presidents Woodrow Wilson and John F. Kennedy agreed with Republicans that higher tax rates on individuals and businesses did not translate into higher tax revenues for the government or economic growth.
In 2015, you would be hard-pressed to find a Democrat who would agree with Republicans on tax policy. Democrats are adamant supporters of higher tax rates to fund government programs and subsidies. The rhetoric of the left constantly vilifies the wealthy and accuses them of not “paying their fair share.”
So, who is really bearing the nation’s tax burden? Contrary to popular belief, the richest 1% of Americans earn 22% of national personal income, but they pay a whopping 40% of all income taxes. The top 5% earned 37% and paid 61% of all personal income tax.
The top 10% earned 48%, and they paid 71% of all personal income taxes. In comparison, the bottom 50% earned 12% of personal income, but they paid just 3% of federal income tax.
Is it fair that 10% of income earners pay 71% of the federal income tax burden while 47% of Americans who pay nothing (excluding Social Security and excise taxes) receive tax refunds every year? In addition, there is a dangerous disconnect between the 47% of American with no tax liability and the rest of taxpayers.
The 47% of Americans will be more receptive to tax increase proposals, because a tax cut would be perceived as threat to the social programs that nearly 50% of Americans enjoy. Every American should pay their fair share, not just the wealthy.
So how do we spread out the tax burden to all Americans more evenly?
Representative David Camp (R-Mich), former chairman of the House Ways and Means Committee proposed a comprehensive tax reform plan in 2014. The Camp plan would lower marginal income tax rates, lower the corporate tax rate, increase the standard deduction for individuals and married couples, phase out certain tax breaks, and reform retirement savings plans.
Simplifying the tax breaks from seven brackets to three (10%, 25%, and 35%) brackets will help distribute the income tax burden more evenly. The Joint Committee on Taxation’s (JCT) analysis on this plan finds this type of tax reform would translate to a tax cut for both the middle class and the top income bracket and is revenue neutral.
We must change course and not follow the same path of massive spending and disproportionate taxation of Greece, Italy, Ireland, Spain, and Portugal where a greater number of people live off the social programs and don’t contribute to the system.
Every American should have a stake in our country’s taxation policy, not just the wealthy and middle class.
Nana Osei – SC, College of Charleston Student, Bio – I believe the American government should incentivize higher earning and allow Americans to keep that money in their pocket. Lower income taxation creates a scenario in which Americans have more money to spend and stimulates the economy.
Americans should be able to decide what they want to spend their money on rather than the government taxing them and deciding for them. Lower income tax allows Americans to make choices with their money such as hiring more employees which further stimulates the economy.
In my opinion, any taxation at 40% is excessive and takes financial freedom away from the citizens earning that money. I do not believe higher taxes helps the economy at all. It only takes away incentives for earning money in a higher tax bracket.
The highest percentage of income any person or business should have to pay in federal income tax is 35%. The reason I think 35% is fair is because this nation is built on the idea of the American Dream. This dream consists of opportunity for social movement based of the merit of hard work. By increasing federal taxes over 35%, government is taking too much money out of the pocket of citizens.
For the American dream to be successful, the end goal of wealth must be apparent. When federal tax increases to 40% or even higher, it can discourage people from gaining the most amount of income as possible.
For example, in 2013 the federal income tax for a single person earning over $400,00 was 39.6%. The tax on a single person earning over $398,350 was 35%. Due to the large amount of percentage of tax, someone on the boarder of making 400,000 would prefer to make slightly less money, so they are not taxed at such a high percentage.
Anyone paying zero federal income tax should not be allowed to receive a refund from the government. That is unfair to the people earning money and paying higher taxes on their money. Refunds should be reserved for anyone paying taxes on their hard earned money.
Josh Lim – PA, University of Warsaw 2012 Graduate, Ateneo de Manila University 2014 Graduate, Bio – I mentioned last month that Benjamin Franklin alluded to there only being two certain things in life: death and taxes. Both are unpalatable, and we desperately try as much as we can to not think about them. But since tax season is around the corner, the question has to be asked eventually, “What exactly is a ‘fair’ tax burden?”
I’ve come to contemplate this question as I’ve started my working life, and I’ve always believed I should be able to enjoy the fruits of my labor to the extent afforded to me. After all, it’s only right that what I give, I get back in return through a decent salary.
However, I also believe it is the responsibility of every person and every business to adequately contribute to building the nation, whether that is through the labor I give or the taxes I remit. Our success as employees and employers are ultimately built on the success of the country we’re in, and so it is only fair we give back in some form.
But what is fair? Although unpopular, I advocate for a more progressive income tax structure. At most, federal taxes should form no more than 60% of one’s tax burden, with state taxes forming another 40%. If my income, for example, is $100,000 and I have to pay $30,000 in taxes (a 30% tax burden overall), federal taxes would account for $18,000 to be 60% of the overall burden in the 30% paid overall. Or, in another words, if I paid a 30% rate overall on $100,000 of income, federal would be $18,000 and state would be $12,000.
Now this is very simplistic math, and I don’t have the chops to do my own taxes just yet. Tax computations are complex, and if I start factoring in deductions, it will get messy. But I believe this is fair, if only because a lot of the things we take for granted in the United States are funded for by our taxes, both federal and state, even if we like to think they aren’t.
The roads you use every day? Paid for by taxes.
The soldiers who keep America safe? Paid for by taxes.
Entitlements? Paid for by taxes. (But not completely.)
Maintaining the maximum amount of my paycheck to keep me happy and giving my fair share to the federal government doesn’t have to contradict each other. My remitting taxes shouldn’t have to come at the expense of my happiness, and my getting a paycheck shouldn’t have to lead to government begging for assistance at my doorstep.
Why is it that many European countries are supposedly happier than the U.S.? It’s because they are willing to put up with higher tax burdens if it means preserving the existing social order and ensuring a good quality of life for everyone.
But will this work in the United States? I understand the American Dream means working hard to get to where you want to be. But, there is a dark side to this: if you fail, it’s your fault, and that you are completely to blame for your failure. But failure isn’t just my fault: if the system is faulty, the system should be blamed too, right?
Too often people are unable to contribute their fair share, because they make too little. For those who pay no income tax because of this, they should be able to claim refunds, if only because they can use the additional help to survive and make an honest living.
But if you choose to bum out of your own volition, then (if I may use a House of Cards reference) remember President Frank Underwood’s words: “You are entitled to nothing.”
Taxation is only fair. But how we are taxed should be fair too. Let’s see how.
Photo Credit – hywards