Taxes are something most people grumble about on a regular basis. We have all heard the saying attributed to Benjamin Franklin, “In this world nothing can be said to be certain, except death and taxes.”There are all kinds of taxes. Some are more regressive because they are levied not based on the ability of those paying the taxes to afford the tax. Progressive taxation levies more tax on those who can afford it. There seems to be a greater propensity, at least politically, to favor regressive taxes because it places a greater burden on the payment of these taxes on the average citizen and favors the wealthier citizens. Over the past few decades, lowering taxes for the very wealthy has been a particular emphasis by the Republican Party. Polls on taxation clearly indicate that most people believe the wealthiest citizens pay far too little in taxes and should pay more.
Most countries generate revenue from their citizens to provide funding for the operations of their government. How they generate revenue varies from country to country, depending on what the citizens want from all levels of government, from local to state, or federal. Often, a country’s population size dictates how complex its tax system is. For example, Finland, Norway, and Sweden are known for having a high level of taxation because their citizens expect a wide range of government services to help them meet their daily living needs. Much of what these high-tax countries have is what U.S. citizens want from the U.S. government. What we get is a bloated, overpriced military that almost requires military escapades throughout the world to justify its cost. Currently, we are throwing huge sums of money at funding a Gestapo-like Homeland Security effort to deport millions of illegal immigrants. The U.S. constantly makes bad choices on how to spend taxpayer funding.
The U.S. tax system is a multi-level structure with federal, state, and local taxes, including income, payroll, sales, and property taxes, designed to fund government services and redistribute income. The federal government imposes taxes on individuals and corporations based on worldwide income, with rates that increase progressively from 10% to 37% for individuals. Federal income tax is levied on earned and unearned income, with deductions for mortgage interest, state and local taxes (up to $10,000), charitable contributions, and certain medical expenses. Federal payroll taxes fund Social Security and Medicare, and are collected from employees’ and employers’ wages. Corporations pay federal taxes on net income, with large corporations subject to a 15% Corporate tax on financial statement income due to the Inflation Reduction Act of 2022. Other federal taxes include estate, gift, and excise taxes. The Internal Revenue Service (IRS) administers federal taxes, provides guidance, and enforces compliance.
Each state has its own tax system, which may include income, sales, and property taxes. Local governments, municipalities, and counties can impose additional taxes (property taxes and licensing fees). Lower-income individuals and families often pay more in state taxes than in federal taxes. They regularly pay a higher percentage of their income in combined local, state, and federal taxes than many wealthier individuals and families.
The first step in making taxes fairer and better able to address the needs of citizens is better IRS auditing, particularly of the wealthier taxpayers, to collect the taxes that are legitimately owed to the government at all levels. It is estimated that billions of owed taxes go uncollected each year. In recent years, the IRS has been purposely underfunded to neuter their ability to audit the complex tax filings of the wealthiest taxpayers and focus more on auditing middle-income taxpayers. For every dollar spent on IRS operations, particularly auditing, $415 is returned to the government. No other component of government has that level of return on investment.
The U.S. has a huge document filled with unnecessary and counterproductive loopholes that benefit the very wealthy and major corporations. The tax code must be reviewed, and unnecessary and politically targeted loopholes need to be eliminated to produce a fair and progressive tax code that benefits all citizens and does not focus on reducing taxes almost exclusively on the wealthiest individuals and corporate interests.
Taxes, in some form, will always be required of the citizens of any well-functioning country. They need to be progressive, fair, and established, devoid of political influence, and based on the specific needs of all citizens.
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