Do the Rich Pay Their Fair Share of Taxes? Essay

Runing caput: Make THE RICH PAY THEIR FAIR SHARE OF TAXES? 1

Make the Rich Pay Their Fair Share of Taxes?

The Truth about Taxes, the Rich, and the Poor

October 5, 2014 October 5, 2014

Abstraction

Peoples frequently ask the inquiry “Do the rich get richer? ” This is frequently accompanied by a follow up “Do the rich pay their just portion of revenue enhancements? ” The state is divided in this affair and needs closing. I choose this research because my revenue enhancement clients frequently confused with our unjust and complex revenue enhancement system and I need to give them the accurate information. The term “fair share” is non good defined in this inquiry. The best topographic point to get down is to find how much high income persons pay. By analysing the ( a ) Economy: Capitalism vs Socialism, ( B ) chance cost ( the value of what we give up for our pick ) of a Capitalist economic system, ( degree Celsius ) Money and societal behaviour: human reaction toward money, ( vitamin D ) Inflation rate: mean rising prices rate addition 3 per centum yearly, ( vitamin E ) Lifespan addition: people live much longer than old coevalss, and ( degree Fahrenheit ) Tax system: complex and unjust revenue enhancement system in our county. The information gained from this research will assist others to reply their inquiries. The Joint Committee of Taxation provides clear informations on how much revenue enhancement, higher income people pay. This information gives us an thought of the proportion of revenue enhancements each income bracket pays yearly.

Keywords?

Make the Rich Pay Their Fair Share of Taxes?

The Truth about Taxes, the Rich, and the Poor

On March 5th, 2014, another cold, rainy and blowy twenty-four hours, I checked the assignment calendar and realized that my following assignment was with Mr. and Mrs. Tim ; both of them retired a few old ages ago and settled in Salem. Looking through their last few old ages of revenue enhancement return I realized that the twosome was non required to pay any revenue enhancements, but they ever surprised me with inquiries, which sometimes had no specific replies at all. Tim is a tall, heavy and unsmooth sonant individual, and his married woman is a short, thin and smiley faced lady who ever supports her husband’s positions. Even though I am really knowing and good educated in revenue enhancement affairs, in my last 20 old ages in accounting and revenue enhancement professional life, no 1 surprises me more than Tim.

After confirmation of the paperss I pointed out to them that they had more income this clip, so they may hold to pay some revenue enhancements. He looked at me like a king of beasts waiting for quarry, and replied with his natural unsmooth voice “Are you doing me pay more revenue enhancements? Why? I paid revenue enhancements all my life, now you are stating me I need to pay for everybody.” “Tim, I am merely a courier please don’t shoot me” , I courteously told him but, he merely started his ailments about the revenue enhancement system and his antigovernment sentiments. Finally, he said, “Do you know Mr. Cletus, the hapless ne’er pay revenue enhancements and they are depending on the public assistance, and the rich are deceivers, and they are besides non paying their revenue enhancements, but in-between income people like me need to pay for everybody.” His married woman agreed with him and said “Honey you are perfectly right, we are paying for everybody.” Then Tim looked at me in the oculus and asked me a surprising inquiry: “Do the rich pay their just portion of revenue enhancements? ”

Equally long as I can retrieve, ailments, accusals and allegations about the revenue enhancement system in America between the rich and hapless have been turning every twelvemonth. My rich clients’ ailment was the authorities taxing them below the belt. The American populace is misled by the politicians, media, and unqualified authors and analysts with inaccurate informations. My professional experience and my cognition of the topic hold given me some credibleness to discourse statement to the people on both sides of the issue, and they deserve the truth. My intent is to uncover the findings with accurate informations.

Many of those who claim the rich are non paying their just portion have non provided standards for finding the just portion. Since the word “fair share” is non a mensurable unit, so how are we to specify the consequence based on an immeasurable definition. Many people worry about the income inequality which creates societal unfairness to the community. There are no clear standards for finding, what is just, or when a state is unfair. The state is divided in this affair and needs closing. We need to analyse the several factors of this issue, including: type of economic system, chance cost, money, societal behaviour, rising prices rate, and our current revenue enhancement system.

Economy and Opportunity Cost

America is a free endeavor ( Capitalism ) state where people have the freedom to take, voice their sentiment, elite leaders, and where most concerns are owned by private persons. A different universe position would be Socialism such as in China or Cuba. In this type of economic system, there are far less freedoms and most concerns are controlled by the authorities. “The true cost of anything is the value of the following best thing which is given up because of that determination. Opportunity Cost stems from the foregone opportunities that are sacrificed in executing this certain action” ( Kling, 2005 ) . Choosing Capitalism over Socialism or frailty versa comes with chance cost. In a Capitalist state concerns make net incomes that go to the proprietors. It is normal the concern people become rich in a capitalist system, and they take advantage of the resources available to them. In a Socialistic state concerns are controlled by the authorities and the net incomes they make profit the authorities and people have less chance to get down a concern. Capitalism offers everyone a opportunity to do money if they choose. How much one makes depends on fortune, forfeit, difficult work, and cognition of their concern. Unlike a socialist economic system, this economic system allows us to trail our dreams and offers a opportunity to better our lives. What we give up in our economic system is authorities control and allotment of wealth.

Money and Social Behavior

There are three groups that people can be categorized in. The first group consists of good off people who are hard-working, organized, and willing to take large hazards to accomplish their ends. They have a big sum of resources around them that they take advantage of to better their standing in life. Most folks in this group go financially independent, challenge themselves, and adapt to alterations easier than most. They don’t believe doing more money is a wickedness. “The Bible doesn’t say that money is the root of all evil ; it says that the love of money is the root of all sorts of immorality. Money is amoral. It doesn’t have ethical motives. It’s non good and it’s non bad. It’s the love of money that’s the problem- that’s a human job, non a money problem” ( Ramsey, 2011 ) .

The 2nd group is made up of those who play it safe. They are hardworking, smart, optimistic people. They set their life up safely and are non willing to take high hazards. More frequently they struggle because they are non rich, non hapless, but someplace in the center of the seesaw totter. “People want things to remain the same and they think the alteration will be bad for them. When one individual says the alteration is a bad thought, others say the same” ( Johnson, 1998 ) .

The last group consists of those in the underside of the fiscal and societal pyramid. They are trapped by the system due to societal unfairness and do non cognize how to acquire out of the trap. They accept themselves as less fortunate and yet work hard except for a few who enjoy the support they receive from others. “Poor people are more avaricious than rich people. If a individual was rich, that individual was supplying something that other people wanted. In my life, over all these old ages, whenever I have felt destitute or short of money or short of aid, I merely went out or found in my bosom what I wanted, and decided to give it foremost. And when I gave, it ever come back” ( Kiyosaki, 1997 ) . The first and 2nd groups make more income and lend more revenue enhancements than the 3rd group. Some of the 3rd group don’t pay any federal income revenue enhancement, but still pay societal security and Medicare revenue enhancements.

Inflation and Current Tax System

“We can’t avoid rising prices, so we need to factor it into the mystifier. To cipher hereafter costs, utilize 3 % – the mean one-year rising prices rate since 1926” ( Jason, 2009 ) . Peoples make more money today than in the past partially because of the rising prices rate. Expenses are increasing for mundane life. A million dollars 40 old ages ago is non the same as a million dollars today. Due to betterment of modern medical specialty and eating wonts the mean life span has increased since 1946. People unrecorded much longer than old coevalss so they need to salvage more money for retirement.

To mensurate the equity of the US income revenue enhancement system is, by any step, really advanced and complicated. There are many types of income revenue enhancements and each one has its ain regulations and ordinances. The most common one is the personal income revenue enhancement, which merely made up 28 % of all IRS aggregation in 2012 ( Joint Committee on Taxation, 2014 ) . Before finding the equity of the revenue enhancement system, I will analyse the manner Congress revenue enhancements people based on the class of their income.

There are two chief classs of income, inactive and active income. Simplifying the term “active” is a individual actively take parting in a trade or concern, for illustration, employees earn rewards while working, or concern people doing net incomes from a concern which he or she materially participated in. Generally, active income is treated as ordinary income and capable to self-employment/social security and Medicare revenue enhancement. Income generated from other beginnings such as involvement, dividend, stock sale, belongings sale is called inactive income. This sometimes creates capital additions revenue enhancement. Both classs of income or loss are taxed and treated otherwise. Congress set the capital addition revenue enhancement rate to 15 % for most state of affairss to assist everyone because some people ne’er recover capital losingss due to restriction. The rich and hapless are puting in inactive activity and both take advantage or suffer from losingss. The rich people take more hazard and put more than others and they may do more money or lose money. Married people doing a capital addition up to 72,000 dollars did non pay any revenue enhancements in 2013, which helped many lower income people. Taking more hazard and confronting the effects are non unjust or unfair ( Joint Committee on Taxation, 2014 ) .

Even though rich people make net incomes from capital addition and pay the lower revenue enhancement bracket of 15-23 % revenue enhancement on their capital addition revenue enhancement, they besides pay other revenue enhancements. Such as the employer part of societal security and Medicare, the medical insurance premium for their employees and other periphery benefit payments to employees. These are revenue enhancement free benefits for employees. We must take into history excise revenue enhancement, gross revenues revenue enhancement, and province revenue enhancement payments ( Joint Committee on Taxation, 2014 ) .

The most of import revenue enhancement is the “death tax” which is after the decease of a individual ; the Estate can except merely 5 million dollars, if married the partner besides gets an extra 5 million exclusion. Everything else is nonexempt up to a 40 % revenue enhancement rate ( Joint Committee on Taxation, 2014 ) . They besides need to pay a province heritage revenue enhancement anyplace from 8-20 % depending on the province revenue enhancement rate. Oregon heritage revenue enhancement exclusions are merely 1 million dollars. Many of these rich people pay a immense revenue enhancement after their decease.

Here are some informations provided by The Tax Foundation, an independent not-for-profit, organisation ; “The Top 50 Percent of All Taxpayers Paid 97 Percentage of All Income Taxes ; the Top 5 Percent Paid 57 Percentage of All Income Taxes ; and the Top 1 Percent Paid 35 Percentage of All Income Taxes in 2011” .

Table 1. Summary of Federal Income Tax Data, 2011 Beginning: Tax FoundationLundeen ( 2014 )

Number of Returns*

AGI ( $ 1000000s )

Income Taxes Paid ( $ 1000000s )

Group ‘s Share of Total AGI ( IRS )

Group ‘s Share of Income Taxes

Income Split Point

Average Tax Rate

All Taxpayers

136,585,712

8,317,188

1,042,571

100 %

100.0 %

Top 1 %

1,365,857

1,555,701

365,518

18.7 %

35.1 %

& gt ; $ 388,905

23.5 %

1-5 %

5,463,429

1,263,178

223,449

15.2 %

21.4 %

17.7 %

Top 5 %

6,829,286

2,818,879

588,967

33.9 %

56.5 %

& gt ; $ 167,728

20.9 %

5-10 %

6,829,285

956,099

122,696

11.5 %

11.8 %

12.8 %

Top 10 %

13,658,571

3,774,978

711,663

45.4 %

68.3 %

& gt ; $ 120,136

18.9 %

10-25 %

20,487,857

1,865,607

180,953

22.4 %

17.4 %

9.7 %

Top 25 %

34,146,428

5,640,585

892,616

67.8 %

85.6 %

& gt ; $ 70,492

15.8 %

25-50 %

34,146,428

1,716,042

119,844

20.6 %

11.5 %

7.0 %

Top 50 %

68,292,856

7,356,627

1,012,460

88.5 %

97.1 %

& gt ; $ 34,823

13.8 %

Bottom 50 %

68,292,856

960,561

30,109

11.55 %

2.89 %

& lt ; $ 34,823

3.13 %

*Does non include dependent filers.

http://taxfoundation.org/sites/taxfoundation.org/files/docs/Distribution%20of%20Federal%20Taxes%20in%202014.png

This research and the grounds provided cogent evidence that rich people pay their just portion of revenue enhancements. Peoples who make over $ 200,000 yearly pay 70 % of the overall revenue enhancement in the United States. Well off persons work hard for their money, take high hazards, managed through difficult times, and accomplished their ends. Most of us have a shooting at bettering our lives and it is our picks that determine whether we win or neglect. We should non penalize people for doing more money, drawing the economic system up, and paying some of our portion of revenue enhancements.

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