Searcy, AR (LP) — When you work at a job to make money, you pay income taxes. Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools. During the Civil War Congress passed the Revenue Act of 1861 which included a tax on personal incomes to help pay war expenses. The 16th amendment, ratified in 1913, removed this objection by allowing the Federal government to tax the income of individuals without regard to the population of each State. Taxation not only pays for public goods and services; it is also a key ingredient in the social contract between citizens and the economy. Holding governments accountable encourages the effective administration of tax revenues and, more widely, good public financial management.
The richest 1% pay an effective federal income tax rate of 24.7%. That is a little more than the 19.3% rate paid by someone making an average of $75,000. And 1 out of 5 millionaires pays a lower rate than someone making $50,000 to $100,000. Mrs. Treadway says, “If you are a dependent, you should choose that filing status. I choose the Head of Household because I am the Head of my Household.” Taxes are not bad. Taxes are good. The argument for taxes is a very straightforward one: if the government is on balance a very positive force in society, then taxes are good. Taxes are the lifeblood of government and so if government is basically good, then so are taxes. Mrs. Treadway says, “A dependent is somebody that you support. You have to provide at least half of the person’s support food, clothing, shelter so if you do this, yes, you have a dependent. If you live with your parents, you are their dependent.” Taxes have generally been around since the beginning of civilization or history. The earliest known tax was implemented in Mesopotamia over 4500 years ago, where people paid taxes throughout the year in the form of livestock (the preferred currency at the time). The ancient world also had estate taxes and taxes. Primarily through the supply side. High marginal tax rates can discourage work, saving, investment, and innovation, while specific tax preferences can affect the allocation of economic resources. But tax cuts can also slow long-run economic growth by increasing deficits. The income tax is flawed for a number of reasons it discourages economic growth and encourages a bloated government. It’s true that wealthy citizens usually can afford to pay more taxes on their incomes and investments dividends and capital gains.
The requirement to pay taxes is not voluntary. Section 1 of the Internal Revenue Code clearly imposes a tax on the taxable income of individuals, estates, and trusts, as determined by the tables set forth in that section. Mrs. Treadway says, “You should use IRS Form 1040. You can find Form 1040 at irs.com or use any online resource like turbotax.com or handrblock.com and complete this online. It’s fast and easy.” To earn taxable income and not pay tax on it is against the law. The entire federal and state governments would all shut down including all those public services provided to the general public. Companies wouldn’t care since they’ll save money. The government would run out of money. Mrs. Treadway says, “If you are a dependent, this doesn’t apply to you. Otherwise, if the value of your deductions is greater than the standard deduction in 2020 these are $12,400 for singles or people who are married and filing separately or $24,800 for people who are married and filing jointly and $18,650 for Heads of Household you should consider itemizing. Otherwise, go with the standard deduction.” The belief that taxes should be based on the individual’s ability to pay, known as the ability-to-pay principle, and the benefit principle, the idea that there should be some equivalence between what the individual pays and the benefits he subsequently receives from governmental activities. In 2017, the top 50 percent of all taxpayers paid 97 percent of all individual income taxes, while the bottom 50 percent paid the remaining 3 percent. The top 1 percent paid a greater share of individual income taxes 38.5 percent than the bottom 90 percent combined 29.9 percent.
Taxing citizens is a vital method of financing the most essential public sector activities, such as the courts, the legal system, national defense and police protection. In addition, it provides the means for producing social programs, such as public health services, education and welfare. Put It in the Freezer. A way to transfer valuable assets to others such as your children while avoiding the federal estate tax. “Freeze” the value of assets many years before you plan to pass them on to exclude all asset appreciation from the estate, and any taxes. Billionaires generally don’t make their money from big salaries; their wealth is built on investments in companies and other assets, from real estate to art. The money they make on these investments is taxed differently than the money you make from working.
