Understanding the Logistics of Tax Reforms

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The long-awaited tax reform will be unveiled next week by Senate Republicans. Experts are already speculating that the rich will be under the microscope in the new reform. Since time immemorial, the rich have always been accused of having numerous tax breaks that allow them to pay taxes at a rate of 39.6 percent. This means that it will be possible to reduce taxes for the rich people by doing away with these breaks. Also, it will be possible to raise the same amount like before or even more. This makes it possible to broaden the base while reducing taxes. At the end of the day, the tax code will become simpler and fairer. If you ask any economist from any part of the globe, this is what they have always strived to achieve. There is also an approach by the Trump administration that warns the rich that they will not benefit at the end of the reforms. This leaves us with the desire to know who the rich Americans are. The definition of a rich person can only be found in the records of Internal Revenue Service. One percent of the American population is made up of the rich. Approximately 1.4 million Americans have a gross income of $466,000 which defines the rich.

In total, this one percent population is credited with a federal tax worth 542.6 billion. Going by the figures, this makes it 39.5 percent of their total income. If you decide to go for a more expansive view, you should understand that people who make more than $133,000 contribute to more than 71 percent of the tax that is collected in the United States. This means that they don’t pay the top rate as it amounts to 27 percent going with the adjusted gross income. When it comes to the superrich, they even pay less as they are taxed at a rate of 24 percent. American superrich bracket consists of 0.001 of the American population. This is the mere reason why the tax reform is not about the rich people. For starters, these are people who benefit from dividends and capital gains that are taxed at a lower rate in comparison to their wages and salaries. The new reform by the Trump administration is aiming at doing away with these tax breaks which have always drawn resistance and lobbying from the affected. This will make it possible to change overall rates by getting rid of the tax breaks.

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