How Much Income Tax Are the Feds Really Taking From You
How Much Income Tax Are the Feds Really Taking From You
Arguments about the meaning of the current income tax has continued for nearly 100 years. Courts are reluctant to support a literal reading of the tax laws in favor of potential taxpayers, since it can lead to tax avoidance. Professor Soled points out why judicial doctrines are used against tax avoidance strategies in general,
Libertarians and capitalists are fond of quoting John Locke as evidence governments shouldn't intervene in the lives of the individual through income taxes. Locke wrote, "...every Man has a Property in his own Person. This no Body has any Right to but himself. The Labour of his Body, and the Work of his Hands, we may say, are properly his." (Locke 287,288) But government taxes aren't the only means of confiscating what is properly ours.
While capitalists and libertarians are fond of citing Adam Smith's single reference to "the invisible hand" in The Wealth of Nations, they fail to mention that, in the same book, Smith also said, "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state." (Book 5, Chap.2, Pt. 2)
So from your working income, the federal government taxes takes your 'income tax' you pay according to your taxable income applied to the tax brackets and also gets 15.3% of your working income too. Let's take a person under age 65 who makes $80,000 for a salary and apply the two federal income tax systems on his salary to see how much tax he generates for the fed.
Year-End Income Tax Relief Tip #3: Are your subcontractors really self-employed independent contractors or are THEY employees? While you may be a true self-employed independent contractor, you need to establish whether your subcontractors are self-employed independent contractors or employees. According to IRS Summertime Tax Tip 2009-20, "the cost of misclassification to employers in additional taxes, as well as administrative time, or the loss of tax-favored status for employee benefit plans, can be steep." If you're not sure, contact a tax attorney or tax resolution specialist to get tax help immediately.
Now that you understand that you are taxed on net income after deductions doesn't it make sense to find ways to legally increase the number and total amounts of these deductions? If you earned $40 000 a year and had $40 000 in income tax deductions, your taxable income would be zero and you would recover 100% of the income taxes you paid for that year. That is how the wealthy manage not to pay income taxes each year; by having enough deductions to offset their total income.
So if having an 80% tax rate is slavery - where one's whole life is bound up with a slave master - then certainly having an income tax rate of 30% or 50% equates to exactly that same percentage of slavery. Given a choice of being a 100% slave or a 50% slave, you may opt for the latter, but it would hardly be moral.
Income tax was first introduced in Britain by William Pitt, in his budget presented in 1798. The tax was levied to pay for weapons and equipment, which were being prepared for the Napoleonic war. In the United States, income tax was levied for the first time during the Civil War.
In addition to the traditional taxpaying individual there are others who have to report and possibly pay an income tax. All businesses and estate properties of an individual who has passed on are subject to an income tax. A small business owner or the executor of an estate property will have to file different federal and state income tax forms than the traditional taxpayer. These forms can be obtained at the same places where standard federal and state forms are available.
At first look, a lack of state income tax may seem like a great benefit. Generally, this is true, but you need to do your homework. Many of the no income tax states make up the difference by collecting taxes in other ways. Each state is somewhat different; some have high relative state sales taxes or higher property taxes.
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