The April 18 returns are behind us and we are looking forward to another year of generating income and paying taxes. However, looking back at recently completed returns, the analysis projects that about 45% or 70 million US citizens will not owe any income tax by the year 2010. This is a slight drop from last year, where 47% of Americans owed nothing to the IRS. for 2009. This means that about half of Americans pay federal income taxes, while the remaining half do not. However, most of this 45% of non-tax households pay state taxes through property and sales taxes and through state income tax. They can also pay federal non-income taxes through FICA payroll taxes for the national Medicare and Social Security program. Only at the federal income level are they not required to pay taxes.
How do 45% of households get into the tax-exempt category?
American households are working their best to get refunds from the IRS and avoid paying as much federal income tax as possible. Through the various tax deduction incentives provided by the government, more and more households are paying less in terms of income taxes. These incentives for tax evasion include purchasing life insurance and retirement plans, using hybrid cars, buying a home, buying bonds, spending on research, and adopting children (among other tax deductions). .
How is this manifested in tax reforms?
Although the majority of the 45% tax-free group are low-income people, there are plenty of middle-class and high-income people who get huge tax deductions through the aforementioned deduction routes. The problem with income tax is that most Americans do not seek the direct benefits of these tax breaks, but rather participate in the break just to evade taxes and get tax refunds. In fact, there are many Americans who are positioned to earn income from this current tax structure. These excessive deductions ordered by Americans have resulted in the IRS paying out around $100 billion in tax refunds.
So how likely is tax reform?
The truth is that the federal government still requires funds to operate the national business. Therefore, for comprehensive reforms to be put in place, one of the main foci of change must be the income tax problem from the excessive list of incentives that we all expect to claim each year. In the recent past, Congress has been serious in looking toward these reforms. However, the question that remains is whether taxpayers are willing to forgo these deductions in an attempt to adopt the reforms.
