The federal tax code is complex. This complexity generally arises from two factors: the use of the tax code for purposes other than raising revenue, and the feedback process of amending the code.
While its main intent is to provide revenue for the federal government, the tax code is frequently used to direct the behavior of businesses and individuals in an attempt to achieve social, economic, and political goals.
For example, the tax law provides a deduction for mortgage interest in order to encourage home ownership. A theoretically pure income tax would not allow this deduction, which is not an expense incurred for the production of income. The allowance of the mortgage interest deduction is seen by some as discrimination against taxpayers who rent, rather than own, their home: the payment of rent for one's home is not deductible. Of course in theory, landlords generate tax savings on their mortgage interest payments, and pass these savings on to renters.
Because the government uses the tax code as an instrument of social policy, the code as a whole appears to lack a coherent organizing principle. This lack of a coherent organizing principle has become magnified over time, due to the interplay between successive legislative amendments and regulatory changes to the law and the private sector responses to those amendments and changes. For instance, suppose that Congress enacts a tax credit to encourage a particular type of activity. In response, a group of taxpayers who are not the intended beneficiaries of the credit re-order their affairs, or the superficial aspects of their affairs, to qualify for the credit.
Congress responds by amending the code to add restrictions and target the credit more effectively. Certain taxpayers manage to use this change to claim additional benefits, so Congress acts again, and so on. The result is a feedback loop of enactment and response, which, over an extended period of time, produces significant complexity.
In general, the U.S. income tax is highly progressive, at least with respect to individuals that earn wage income. As of 2001, the top 1 percent of individual taxpayers paid approximately 23 percent of all federal taxes. The top 5 percent paid approximately 39 percent, and the top 10 percent paid 50 percent of all federal taxes. The bottom 20 percent of taxpayers paid a little over 1 percent of all federal taxes.
Moreover, the progressivity of the U.S. tax system has gradually increased over recent decades. The top 20 percent of taxpayers paid approximately 56 percent of all taxes in 1980, and this figure gradually has risen to 65 percent, as of 2001. In recent years, however, a reduction in the tax rates applicable to capital gains has significantly reduced the income tax burden on non-wage income. In this regard, the general structure of the U.S. tax system has begun to resemble a partial consumption-tax regime.
For more free legal information on tax law, please visit tax law.
whole house cleaning Deerfield ..Import duties continue to be significant elements in the cost... Read More
In the rush to get tax returns prepared and filed... Read More
As a gentleman was leaving my class recently, he wanted... Read More
As tax time approaches, many home-based business owners begin completing... Read More
In trying to comply with tax laws for your e-business,... Read More
Over 50% of marriages end in divorce in the United... Read More
Self-assessment relies on taxpayers voluntarily meeting their tax obligations. This... Read More
One way to maximize your business profits is by reducing... Read More
All tax authorities to e-commerce transactions should investigate the record... Read More
"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More
Statistics for IndividualsUnfortunately, the IRS increased its rate of auditing... Read More
Are you in the middle of a disagreement with the... Read More
It's a major fear for most Americans: A notice from... Read More
One of the most important, but least understood or appreciated... Read More
Often people fall on hard times and stop paying on... Read More
1812The first attempt to impose an income tax on America... Read More
The electronic transaction ordinance defines the certificated copies in which... Read More
As a small business owner, it's wise to familiarize yourself... Read More
The United States is a nation of entrepreneurs. There are... Read More
The U.S. Department of Agriculture estimates that it costs nearly... Read More
Does this scene sound familiar? It's April 7. You haven't... Read More
Each year, the IRS lists various scams taxpayers get caught... Read More
Newlyweds and the recently divorced should make sure that names... Read More
Hit a big one? With more and more gambling establishments,... Read More
Six Urban Myths ? Taxation"I am proud to be paying... Read More
home cleaning services Des Plaines ..It may not be high on the list of wedding... Read More
In the latest Star Wars episode, the evil empire executes... Read More
As tax time approaches, many home-based business owners begin completing... Read More
Often people fall on hard times and stop paying on... Read More
IRS Tax forms can be confusing.Am I a 1099 or... Read More
OverviewIn the Pre-Budget Report of December 2003 the Chancellor Gordon... Read More
"Deducting Meals and Entertainment"O.K. You've been working really hard on... Read More
To tax or not to tax - this question could... Read More
Whether helping the kids with a down payment on their... Read More
Over 50% of marriages end in divorce in the United... Read More
Most people look forward to getting their tax return, but... Read More
Six Urban Myths ? Taxation"I am proud to be paying... Read More
How Home-Based Businesses Can Avoid Giving Uncle Sam... Read More
A Federal Tax Lien (FTL) is a legal instrument that... Read More
Why a Corporation Helps Save You TaxesThe Tax Rates (Notice... Read More
If you are a Small Business Owner or Self-Employed Person,... Read More
Emerging Legal issues of Tax compliance of e-business Self-assessment system... Read More
Deduction of Refinance PointsAny points that you pay in the... Read More
April 15 - The most dreaded day of the year... Read More
One way to maximize your business profits is by reducing... Read More
As your business grows, you are going to need help.... Read More
Your days as an entrepreneur and businessperson are consumed with... Read More
Running a home based business reaps many wonderful tax deductions... Read More
If you paid someone to care for a child so... Read More
In the largest criminal tax case ever filed, KMPG has... Read More
Tax |