If you were king or queen and could change the tax system today — Tax Day — how would you do it?
The super rich pay a lot less taxes than they did a couple of decades ago, Associated Press reports.
The Internal Revenue Service tracks the tax returns with the 400 highest adjusted gross incomes each year, AP writes. The average income on those returns in 2007 was nearly $345 million. Their average federal income tax rate was 17 percent — down from 26 percent in 1992, AP reports.
Over the same period, the average federal income tax rate for all taxpayers declined to 9.3 percent from 9.9 percent, AP writes.
The top income tax rate is 35 percent, so many people enjoy a variety of tax breaks, AP reports. There are so many breaks that 45 percent of U.S. households will pay no federal income tax for 2010, according to estimates by the Tax Policy Center, a Washington think tank.
How would you make it better?
Some advocate a national sales tax that would replace much or all of our income tax system, saying it will be much fairer. Everyone would pay the same percentage on the goods and services they buy.
Others say that such a system is regressive and unfair because it means low-income and middle-income consumers would pay a higher proportion of their salaries than wealthier consumers would pay. That would defeat the purpose of a “progressive income tax,” which is based on the idea that those with more resources can afford to contribute more for the overall good.
Is a worthwhile alternative to keep the current income tax system, but close some or all of the loopholes? If so, should there still be graduating income tax rates based on income?
What do you think?
- Henry Unger, The Biz Beat
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