Daily News editorial

With the federal government in the process of changing the tax code, statements and opinions about the possible new tax law seem to be everywhere. Like other issues, separating fact from fiction can be a challenge, so here is some information straight from the Internal Revenue Service.

The IRS released tax data for 2014 earlier this year, and some of the information may surprise you. Many people think everyone pays federal income taxes. This is not true. Would you believe almost 50 percent of the people who file tax returns pay absolutely no federal income tax? It’s true.

In 2014, about 48 percent of Americans filing tax returns paid no federal income tax. According to the IRS, this included taxpayers with an adjusted gross income below $38,173, or about $18.35 per hour.

When you read an Associated Press story noting that lower-wage individuals will pay more in taxes under the possible new legislation, understand most people currently are not paying any federal income taxes.

If you read or listen to the news, invariably you’ll come across someone saying any change to the tax code is just for the rich people. Knowing the statistics, it’s not surprising rich people would be affected the most by changes to the tax code because they pay most of the money.

According to the IRS, the top 1 percent income level individuals pay 39.5 percent of the tax dollars and pay the highest tax rate at 27.2 percent. In 2014, the top 1 percent paid more income taxes than the bottom 90 percent of taxpayers combined. To be in the top 1 percent income, a person must have an adjusted gross income of $465,626 or higher.

Some people say this still isn’t “fair” because top earners make more money than everyone else. This is true. In 2014, the top 1 percent earned a 20.6 percent share of income. However, while top earners made a higher share of income, they also paid a higher share of taxes.

Looking at who pays federal income taxes from a broader perspective, the top 25 percent of earners pay about 87 percent of the income tax dollars. To be in the top 25 percent, an individual must earn $77,714 in adjusted gross income.

Some people may have heard billionaires like Warren Buffet say they pay a lower tax rate than their secretary – and this is true. What you are not being told is Buffet historically has not taken a salary, so he pays no income taxes.

However, with his vast holdings, Buffet pays capital gains taxes. According to the Tax Policy Center, “taxpayers in the 10 and 15 percent tax brackets pay no tax on long-term gains on most assets; taxpayers in the 25-, 28-, 33-, or 35- percent income tax brackets face a 15 percent rate on long-term capital gains. For those in the top 39.6 percent bracket for ordinary income, the rate is 20 percent.”

Others get frustrated with the current and proposed tax code over the exemptions some people receive or get taken away. We looked up some unique cases of tax deductions to illustrate just how ridiculous some of them can be.

If you work from home, it is possible expenses related to mowing your lawn can be tax deductible. According to efile.com, if your yard has some relevance to your home-based business, lawn care expenses may be deductible. Nothing like getting paid for a little yard work, right?

This also goes for expenses related to your swimming pool. If your doctor tells you swimming will help a medical condition, you might be able to deduct expenses related to your swimming pool. A documented case where an arthritis sufferer deducted the cost of installing and maintaining a pool is proof of this deduction.

Some people get upset because folks who have more money get deductions for things such as airplanes. The reality is many people get tax deductions for all kinds of things if they are business related.

If changes to the federal income tax regulations get signed into law, you will hear Republicans tout the tax relief and economic benefits. Democrats certainly will tell you any tax changes signed into law are “only for the rich people” and “hurt the middle class.” Both of these stories are old – and not necessarily true.

The TDN editorial board supports a flat tax approach. The social gerrymandering of tax deductions in the tax code are ridiculous. Why couldn’t we have two or three flat tax rates and allow taxpayers to choose paying a flat tax or using the existing tax code?

That way the people who want to try and game the system by taking a tax deduction for lawn-mowing expenses can do so, and people who want to pay a flat rate can do so.

Regardless, the IRS data clearly shows about 50 percent of taxpayers pay virtually all income taxes and about half of tax filers pay nothing at all – and that’s the truth.

1
0
51
1
0

Load comments