In America, the powerful and wealthy are able to abuse the taxation system to their benefit, and this paper will demonstrate how this is done and the solutions to those problems, as well as refute the opposition. America has had it’s moments of glory and triumph yet also it’s moments of failure and loss. However, it seems nearly impossible to predict an economic recession or a war, so one can never know when tough times are approaching. Currently, America is in the second longest period of stock market growth, ever. The natural conclusion, then, is that the economy here is healthy and strong, and that this growth will continue. Unfortunately, however, America’s stock market is in for a correction sooner or later, because the wealth and …show more content…
While the maximum tax rate on normal income is 39.6%, the maximum tax rate on capital gains, which is how many investors become rich, is 20%(“How are capital gains taxed?”). In fact, investor and billionaire Warren Buffett said that in his taxes, he “Pays a lower rate than his secretary”(HOAR). Does it honestly make sense that a man with 77 billion dollars pays less in taxes than his secretary? It is evident that capital gains taxed at such a low rate encourage this. The third loophole, and the product of politicians and wealthy citizens of the state of Kansas, is a 0% tax rate on Limited Liability Companies, or LLCs. The idea for the tax break was to give the state’s economy a “Shot of Adrenaline”, and it allowed thousands of corporations to pay little in taxes. This means that those companies could employ more people, and spend more money on research and development. So how could this be negative? In short, it allowed individuals to form Limited Liability Companies with only a single employee: themselves. This means that very wealthy people can organize into an LLC, and pay nothing in income taxes, cheating the system. However, it is impractical for the poor to do the same, as they don’t have nearly as much to gain from this. According to Kansas Attorney James P. Zakoura, This costs the state of Kansas “at least $260 million in needed revenue year after year”(MONTGOMERY). The tax system in America is unfair to
Many people believe that because wealthy citizens have more money they are not paying their fair share in taxes; however, this is quite the opposite. According to an article by Jason Russell, he claims that the top one percent pay
The federal and state governments provide the American citizens with all of the basic necessities within our communities and society that is taken for granted. Programs responsible for assistance in times of need, providing a quality standard of living, and maintaining the strongest military in the world costs incomprehensible amounts of money and could never exist without taxes from the American people. Taxes are payments made by individuals and businesses to support the government and its services. The constitution grants that congress “shall have the power to lay and collect taxes, duties, imposts, and excises and to pay the debts and provide for the common defense and general welfare of the people”. Taxes paid by Americans redistribute
People do not enjoy talking about taxes because they are too political, confusing, and depressing. It is no secret that the American tax code is a mess and something many economists describe as too broken to fix. Despite this, politicians have never stopped from trying to “fix” the code, yet they have had very little success. The U.S. Government’s tax code currently comprises “more than 67,000 pages of complexities” (Boortz, Linder, & Woodall 14). The Americans for Fair Taxation (AFFT) was founded in 1995 with one goal: create the simplest and best tax reform plan that would work in the modern market and economy. The AFFT’s best solution was a bill which they promptly called the FairTax.
Parent Corporation owns 85% of the common stock and 100% of the preferred stock of Subsidiary Corporation. The common stock and preferred stock have adjusted bases of $500,000 and $200,000, respectively, to Parent. Subsidiary adopts a plan of liquidation on July 3 of the current year, when its assets have a $1 million FMV. Liabilities on that date amount to $850,000. On November 9, Subsidiary pays off its creditors and distributes $150,000 to Parent with respect to its preferred stock. No cash remain to be aid to Parent with respect to the remaining $50,000 of its liquidation preference for the preferred stock, or with respect to any common stock. In each of Subsidiary’s tax years, less than %10 of its gross
With the advancements in the globalization of the economy, corporations are finding more ways to avoid the extraordinary tax rates set in place of The United States Of America. With the loss of revenue from large companies dodging taxes the government must make up for the loss by either raising taxes or changing the tax code. A recent company to avoid american taxes is Johnson Controls, a company that “…would not exist as it is today but for American taxpayers, who paid $80 billion in 2008…”(The Editorial Board). This use of American resources to get through tough times, and run to another county during an economic incline is an act that calls for reform in the American tax system. However congress has not passed any legislation to fix the
The most beneficial of these tax policies is the capital gains preferential tax rate. When comparing the ordinary income marginal tax rates to the capital gains tax rate, the highest ordinary income tax bracket has a 39.6% rate, while the long-term capital gains tax rate only goes up to 20%. Even with the attachment of the social security surtax imposed by the Affordable Care Act of 3.8%, the highest long-term capital gain rate will be 23.8%, which remains lower than the ordinary income tax rate. Even with the long-term capital gains tax rate applies to investment dividends and capital gains, which are activities mainly practiced by those with the monetary means to do so. A large percentage of the very wealthy generate income from investments rather than wages, and thus their income is taxed at a lower rate. The top 1% holds approximately 50% of American investment in stock and mutual funds, and the bottom 90% holds approximately 9% of the national wealth in stocks and mutual funds. “…the nonpartisan Congressional Budget Office, or CBO, estimates that the
Alyssa Battistoni makes some very good points in her article, “The Public Overwhelming Wants It: Why Is Taxing the Rich So Hard?” regarding how the wealthy have a big part in influencing the government and taxes. Her article makes valid points on how we, as citizens, under estimate the political influence of the rich and that we have a hard time understanding the magnitude of the economic inequality and the relationship it has with political power (Battistoni, 720). She states that many of the politicians themselves are in the wealthy category. This article shows the frustration Battistoni feels by the tone and wording she uses to make her examples such as when she states that we are getting caught in a negative feedback cycle as the rich
The vast wealth inequality in America (and the rest of the world) has been cited as a problem by Obama in many of his State Of The Union address, the Chairwoman of the Federal Reserve Janet Yellen, and many other liberal politicians and economists. Their talk about the problem of how the “1%” help perpetuate the wealth inequality has brought this issue to the forefront of society. In America, many citizens believe firmly in the idea of equality. The fact that some people have more money than they could ever spend, while others live in poverty on the streets conflicts with that value of equality. The most famous reaction to this rampant inequality was the Occupy Wall Street movement that started in 2011. Tens of thousands of people camped out next to Wall Street offices in New York and several other financial centers across the nation to protest the inequality between the 1% and the other 99%. This infamous movement gained media attention as the vocal protesters wanted to make it known that the wealth divide is unacceptable and politicians must rectify the situation. One important policy tool the United States has implemented to combat wealth inequality is a progressive tax. This means that people with more income are taxed at a higher rate than those with lower income. However this tax system has many loopholes in the United States, and the wealthiest individuals are routinely able to avoid being taxed at a higher rate by distributing their wealth in bank accounts
"The most perennially political issues in the United States is the question of how much Americans should be taxed. Indeed, discounted over taxes was one of the major motivating factors in the revolution that established the United States as an independent nation"("Extending Tax Cuts", 1). Since taxes are one of the biggest topics in politics, there is always going to be two sides of the subject, and Taxes will always strike controversy in our country. The topic of having the rich pay more in tax has a deep history to consider, and there will always be both supporters and critics who continue to debate this topic.
Our current income tax system today is very complex, unfair, inhibits saving, investment and job creation, imposes a heavy burden on families, and weakens the integrity of the democratic process. It can't be fixed and must be replaced. The U.S. income tax code is a long and complex system. The income tax system is so complex; the IRS publishes 480 tax forms and 280 forms to explain the 480 forms. The IRS sends out eight billion pages of forms and instructions each year. The administrative costs of the tax system far exceed those borne directly by the IRS. Each year Americans devote 5.4 billion hours complying with the tax code, which is more time than it takes to build every car, truck, and van produced in the U.S.
Should be taxed: Professor at Syracuse University College of Law and Whitman School of Management, David Cay Johnston, in his article, 9 Things the Rich Don't Want You to
Yes, an income tax taxes a person who makes more money a higher amount that a person who makes less which makes it seem fair, but is it really? Let’s take a look at who is actually taxed with an Income Tax versus a Sales Tax. With an income tax the only people who are being taxed are the people who legally have an income. A sales tax taxes everyone who buys things. There is a lot of people who have found ways to slip through the cracks and get paid an under the table or off the books. By getting their income in this way, they avoid having to pay an income tax. Is it fair that they can make just as much money as someone who get their income legally, but not have to pay a penny in taxes on it? That is how a sales tax is more fair than an income
The congressional proposed tax changes will adversely affect the U.S. middle class. According to Pew Research, which claims to obtain its data through non-partisan demographic research and public opinion polling, the American middle class, defined as those making two-thirds to double the median income, makes up about half the population. Further information in this paper is obtained from reliable sources such as the New York Times and the Washington Post, which are typically regarded as center to left, As well as right-leaning sources such as Forbes magazine, whose chief editor, Steve Forbes, is a major Republican. The Congressional Budget Office and the US Census Bureau also supply reliable, researched data, and both Time Inc, Money, and
The United States is in a recession; it has been facing some of the worse economic times since the Great Depression in the 1930’s. One option to fix the economy is to change the corporate tax rate. To lower it or to raise it, that is the question economists have been speculating. America's high corporate tax rate and worldwide system of taxation discourages U.S. companies from sending their foreign-source revenue home, which makes U.S. companies defenseless to foreign acquisition from the international opponents (Camp). Corporations and United States citizens have been fighting for a tax reform, which would hopefully help the American economy; either by lowering the corporate tax, or by raising the tax.
When it comes to income taxes, the focus is usually on jobs, personal investments, and savings. The debate on who should bear the greater burden when it comes to income taxes is timeless. If all types of tax are aimed at developing the economy, it should be everyone’s equal responsibility to engage in taxation regardless of one’s economic class. Both parties involved proclaim the legitimacy of their arguments. The articles under discussion are representative of this debate. On one side of the debate, there are those who feel that the rich should pay more taxes. Then there are those who feel that the rich should not be punished by shouldering the burden of taxation (Benson and White 1). From an economic theorist’s point of view, both articles articulate valid arguments. However, this does not nullify the significance of the prevailing economic situation. The above debate can be based on various economic contexts.