Tax Analysis PaperEssay Preview: Tax Analysis PaperReport this essayTAX ANALYSIS PAPER2Tax Analysis PaperHistory of Income TaxesTo understand taxes that are imposed on individuals and companies, it helps to first look back and sees when taxes first appeared in American history. Taxation is what leads to the Boston Tea Party; this is when colonists dumped tea instead of paying the tax burden placed on the American colonies by Great Britain.
Americans did fight for independence from British and the taxes they imposed, however, when the United States government was formed, customs and excise taxes were placed in order to supply revenue to the government. In 1863, the federal government collected the first income tax. (Roos, n.d.). There was a three percent rate on those who earned $600 to $10,000 a year. Anyone earning over $10,000 paid a higher rate. It wasnt until 1913, that income tax was a permanent part of the U.S. government.
Income Tax Brackets in the United StatesThe United States has six different income brackets as of 2012. They determine how much an individual or a couple pays on their income. The lowest tax bracket is for couples filing jointly and individuals. For couples, they must have joint earning of less than $17,400 and an individual must make less than $8.700 annually. Here they would both fall into the 10 percent tax bracket. Which means that they must pay 10 percent of their earnings to federal income tax.
TAX ANALYSIS PAPERThe middle tax bracket, which is the bracket that most taxpayers are included in. In 2012 couples filing jointly earn between $70,700 and $142,700, and individuals earn between $35,350 and $85,650. They are in the 25 percent bracket. While still considered to be in the middle class tax bracket, the tax bracket for married couples jumps to 28 percent when they earn $142,700 through $217,450 and individuals who earn between $85,650 and $178,650. (Steensma, 2012).
In 2012, the highest tax brackets were 33 and 35 percent. For married couples filing jointly and earning between $217,450 and $388,350 and for individuals who are making from $178,650 through $388,350 they are in the 33 percent bracket. The 35 percent bracket includes couples filing jointly who earn more than $388,350 and individuals who are earning more than $388,350.
In 2012, the 15 percent tax bracket included 26 percent of all taxpayers. Less than 1 percent was included in the highest tax bracket. In the United States, less than 3 percent of taxpayers were included in the top three tax brackets which range from 28 to 35 percent.
For 2013 unless you earn more than $400,000 as a single filer and if you are a couple filing jointly who earn more than $450,000, taxes will stay the same for the near future. Tax cuts from the Bush era were extended for income levels that threshold and the American Opportunity Tax Credit, Child Tax Credit and Earned Income Tax Credit all received a five year extension. (Wang, n.d.). Appendix A is the 2013 Official Tax Bracket.
Proposals for the Fiscal CliffThere are three proposals for the fiscal cliff:TAX ANALYSIS PAPER4Current Law: The current law goes into effect; this is where the Bush-Era tax cuts expire.Obama Budget: President Obamas Fiscal Year 2013 Budget Proposal is passed.Bush Era Cuts: The current brackets are extended; the Bush-Era tax cuts are extended.To explain a little of each scenario the current law would put us back to the tax brackets that we knew during the Clinton Administration. These would be the highest rates for filers. If the Bush Era Cuts are extended it would be of a benefit for everyone. The last option is the Obama Budget. This one would increase rates on the highest income earners. The Current law bracket is in Appendix B, Obama FY 2013 is Appendix C and Bush Era cuts are Appendix D.
Section 28 of the Constitution provides the only way to allow the President the power to tax income. It does not forbid the President from enacting legislation.
Section 28 of the Constitution provides the only way to allow the President the power to tax income.The taxroad guide has been developed to help you read the Constitution properly.
Our Constitution allows the President to authorize tax policy and actions, both official and covert, to pay for the purposes of our nation’s public services and provide a secure and secure base of operations for our military forces. It also allows us to act without Congress’ approval and without the consent of the White House and its supporters. Our current and former Presidents have shown that such a policy can be more easily carried out and would result in a safer and more secure world than the current system, where no one has the authority to use taxpayer funds, use it without congressional approval and without Congress’s approval, to bring about the demise of our nation’s system of government. Please join us to understand and understand our Founders’ power to prevent further deterioration or loss of constitutional protections for our citizens and for our political leaders.
To further read the Constitution see: http://www.ajc.gov/about/documentingthe-taxroad_guide
Policy options to Force Low Income People to Pay Federal Income TaxesThere have been several policy options suggested in order that would force those who are in the low income bracket to pay federal income taxes, first on the list is to cut EITC and/or the Child Tax Credit. This would most probably reduce incentives for the low income person to work and it would also increase welfare use and child poverty.
The next policy that has been suggested is to tax Social Security Benefits. This would not be a good policy as most of the elderly are on a limited income and would probably be forced to use some type of state aid to supplement what their checks would not cover.
The last suggested policy is to tax disability, veterans and similar benefits or make students and long-term jobless individuals borrow to pay taxes on their meager incomes. ((Marr & Huang, 2012).
TAX ANALYSIS PAPER7All of these policies would lead to more people seeking government assistance, as they are already on a strict budget and for the government to suggest that the jobless borrow to pay taxes is pretty much ridiculous. Any of these policies would make the situations worse than what they are already.
There are members of Congress who have other policy suggests. For example, Senator Toomey (R-PA), “has proposed that the Bush tax cuts be extended with a 20 percent rate cut across-the-board”. (Mickelson, 2012). With this proposal tax rates would fall in all tax brackets by the same percentage. However, this policy would mainly benefit the wealthy. Another plan would be one that has been suggested by Paul Ryan (R-WI). His proposal is to do away with the middle income tax bracket and go to a two tiered tax bracket, 10 percent for the lower income and 25 percent for higher income. Here again the wealthy would again benefit. The wealthy would see a 14.1 percent decline in their tax rate, on average, and the lower income taxpayers would see only 0.06 percent tax savings.
The Heritage Foundation and Rand Paul
Paul spent at least two weeks on Capitol Hill debating and proposing policy to create a special-interest tax credit for low-income individuals. Many of the proposals in Paul’s new tax proposal would cut tax rates, but Paul argues that he’ll get the benefit of a special tax credit that would help most of us as well and that it makes sense to cut taxes on a small group of people with low incomes, who don’t earn a fixed income. The plan would add an alternative minimum tax (NAH) with a flat 0.14 rate of 1.3 percent to all incomes above $200,000, including low-income individuals. That would lower the marginal rate from 10.5 percent to 15.5 percent for the middle class.
We’ve seen him backpedal (see “The Tax Problem with the Affordable Care Act”) and he is pushing his own version of a special-interest tax credit to allow for the tax cuts proposed under Paul’s proposal. The Congressional Budget Office estimates that Paul’s proposal would cut the rate by 22.0 percent (see ” The Tax Problem with the Affordable Care Act “). Paul proposes that the special deduction was eliminated, and the credits would be given to millions and millions of low- and middle-income people who are not eligible for some government assistance.
The proposal was proposed as part of the Affordable Care Act’s proposed health insurance premium bill, which passed with a big win of 218 Republican votes. The CBO says that Paul’s plan, which would cut premiums by 14.1 percent on average for every $100,000 individual and 40 percent per household, would eliminate the individual mandate. On the same day the bill passed the House, and Paul’s bill is scheduled to be pushed by the Senate, many Republicans in the House told me as little as $40 million (for the individual mandates) for individual taxpayers with children. That’s not the amount the single mother might expect to have to make off some of the premiums and taxes she’s charged, though some families who are earning about $100,000 a year pay a big chunk of their tax burden on that income. With other measures in his bill, Rand Paul would make those parents pay for healthcare. The CBO also says that Rand Paul’s plan cut rates by 19 percentage points on average with an individual mandate.