Saturday, August 13, 2011

Taxes | Political Blog

Taxes in the United States are an issue that founded this country. From the Boston tea party to the Bush tax cuts, taxes have been at the fore front of policy in our country. It's an issue that polarizes this nation and an issue that could serve to tear us apart. We need to fix our tax system before it destroy's the United States. Is it possible to fix our tax system at this point? How do we reform a system that is so complex and so polarizing? I believe we can fix our system, but we need to get people to understand how we are taxed and that we all, rich and poor, do pay taxes.

The first issue with our tax system in the Untied States is the belief that we are all taxed too much. The reality is that we are one of the least taxed developed nations in the world. When accounting for local, state, and federal taxes the US is ranked 62nd in the world overall in taxes collected to GDP. 27% of our income is taxed on average, that is far lower than France (49%), Germany (43%), and even Great Britain(39%). The reason it feels like we are overtaxed is that we are taxed from so many sources and there are so many levels of taxation. Everywhere we turn there is a tax for this, a fee for that. When you add it all up though, we are taxed less than most other major economies.

The other problem with our tax system is the misconception that the rich pay all the taxes and the poor pay none. This too is false and the truth needs to be established before we can effectively reform our system. Yes, the rich pay higher federal income taxes and the poorer you are the less federal income taxes you pay. What is not mentioned are the enormous amounts of deductions and loopholes that are in place for the wealthy to side step needing to pay for many of their taxes. Through buying extra homes, moving their money to stocks, owning a business, to donating to a charity. The deductions are available left and right to the wealthy, many of which are not available, or are not beneficial to lower-income citizens. The poor in fact, pay many taxes and in some cases pay more in taxes as a percentage of their income than wealthy people do. While lower-income citizens don't pay a large amount in federal income taxes, they do pay a very large share of many other taxes and fees the wealthy do not.

First of all the poor and middle class pay 8.8% to medicare and social security on every dollar they earn. The wealthy only pay that on their first $102,000 of income. If a person makes $1 million a year they are paying less than 1% in those taxes. Businesses also pay 8.8% for medicare and social security for their employees but that is money that could have been paid to employees, so in reality poor and middle class people pay as much as 17% in just medicare and social security taxes. A wealthy person earning $1 million a year pays only 2% for the same programs. Then the poor also pay property taxes whether they own or rent. If they own then they pay property taxes, if they rent, property taxes are most definitely part of their monthly rental charges. Then there is sales tax, which in some states can be as high as 10%. There are vehicle registration fees, gasoline taxes, local taxes, state taxes, toll road fees, utility bill fees, etc. I could really go on and on about the taxes and fees that are paid by poor and middle-income citizens. The argument that they pay no taxes is absurd and needs to leave the conversation when we are discussing tax reform.

The solution is in fact very simple once everyone, both rich and poor, understand that we are not overly taxed in this nation and that we all do in fact pay our fair share currently. The problem with our system now is that it is far too complicated when it doesn't need to be. Our tax system actually favors those who are the wealthiest and who able to afford the smartest accountants. A tax system should never be built to favor one segment or another. We have deductions for this, and credits for that, rates for this group, and rates for that group. We need a rate structure that is simple, fair, and eliminates all the needless fees and various sources of taxation.

I propose a fair and flat tax rate. One that has no deductions, one that has no tax credits, one that eliminates sales tax, one that eliminates social security and medicare taxes and one that includes everyone. Opponents of a flat tax say that it favors the rich and hurts the poor, but when you factor in all the taxes the poor and middle class pay ie. SS, medicare, sales, property, vehicle registration, etc. it works out in their favor as well. A flat tax would take away the advantage wealthy people have of being able to navigate a complex tax system with expensive accountants, and it would allow people to know exactly what they are taxed and move on with their lives. It would allow businesses and the wealthy to anticipate exactly what their tax bill will be and focus their attention on what they do best, which is create jobs and make money. It would also allow the poor to know exactly what they pay in taxes and allow them to live their lives and move the economy forward by buying products without the worry of being nickel and dimed to death by taxes and fees coming from everywhere.

Are we an overtaxed nation? NO. Are we taxed by too many different sources and is our system far too complex? YES. Do the rich pay taxes? YES. More importantly, do the poor pay taxes? YES. We all are in this together and we all pay into this system, a simplified tax system would allow us all to see that we pay our fair share and eliminate some of the animosity between various income groups of our population. A simplified tax system is in everyone's best interest, except for maybe accountants, but the rest of us would be able to focus on what we all need to do to improve our lives, build our families, and ultimately move this country forward.

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