The most recent tax bill has shifted the burden of income tax from lower income individuals to the wealthy.
Posted by Gen FKD on Wednesday, May 9, 2018
Income tax is, by far, the federal government’s largest source of revenue. Income tax is generally defined as a financial tax based on the income of a person or a married couple in a given year. This year, the new tax bill introduced changes to the income tax brackets. Despite what you may have heard, the rich are now paying more than ever before. Under the new tax bill, the top 20 percent of Americans will pay 87 percent of all income tax.
Why does income tax matter?
Obviously, the government needs money to operate, and income tax directly funds the three biggest programs that account for an outsized portion of our federal budget. Those three programs are Social Security, Medicare, and defense.
Breaking it down: About 15 percent of income tax goes to the defense of our country, 24 percent pays for Social Security, and 15 percent pays for Medicare. Revenue from income taxes also goes toward school programs, veteran assistance, job training and other areas. All are vital to those who rely on them. The Pew Research Center broke down how the U.S. government spent just under $4 trillion. That’s 4 trillion of your tax dollars taken from your income. The government needs funding to provide programs for the public, and the money has to come from somewhere (unfortunately).
Progressive income tax
We learned from the past tax season that the top 1 percent of earners are paying the majority of the income tax. Households that earn upward of $150,000 in income now make up 52 percent of the national income, and they also are paying a large amount of taxes.This shows how forward-thinking income tax has become. An advantage of a progressive tax is that the burden of paying for governmental programs funded by taxes is lessened for those in the lower income brackets. While this amendment to the tax law can be viewed as oppressing the wealthy, progressive income tax is seen as a good thing generally.
The 2017 tax bill made possible the progressive income tax that will now be enacted. With the top 1 percent of income earners paying the most, it helps to take the responsibility off of those not earning as much. Progressive income tax will engender a Robin Hood effect — taxing the wealthy more to give back to federally funded programs. But people with lower incomes do still owe federal taxes like Social Security, so it’s not a complete tax exemption. But it does help make tax payments more manageable.
Have something to add to this story? Comment below or join the discussion on Facebook.
Header image: ShutterStock