Navigating the US tax code is like trying to untangle headphone wires after they've spent a night in your pocket - an absolute nightmare. It's so complex that there are whole industries built just to make sense of it. And even the experts in suits can't always agree on what it all means!
Most people would agree that the whole thing should be made much simpler, but that’s a LOT easier said than done!
Here are Five Fun Facts about making taxes less of a headache:
- 🤯 Sticky Wicket - The tax code is a real brain teaser because what's a goldmine for one person might be as useless as a screen door on a submarine for another. And just when you think you've got it figured out, bam! Stuff like deductions for EVs (or other perks) pop up like surprise guests at a party, making things even more confusing.
- 🎯 Simplification Targets - Everyone's got their sights set on simplifying the tax code, but agreeing on how is like herding cats. Both sides of the political spectrum have ideas on what to trim - think mortgage perks, charity deductions, and medical expenses - but try taking those away and watch the fireworks!
- 🤔 Coming Out Flat - A flat tax – where everyone pays the same rate – always pops up in these conversations, but it’s got gaps, too. The rate is simplified, yes, but income would have to be defined in such a way that all human and economic activity is perfectly captured, with no loopholes or gray area. If you can pull that off, then you are a miracle worker! But without it, you’ve still got all kinds of potential for double dipping, side stepping, and all sorts of fancy financial dance moves.
- 📈📉 Gains…Capital Gains - One challenge most don’t think about when it comes to income taxes is the capital gains tax rate. It’s currently lower than the highest income tax rate, meaning rich folks can report income as capital gains and pay less in taxes. In the past, these two rates have at times been in sync…but it never lasts. Politicians play politics, you know?
- 🥧 The Big Pie - All of this matters because the US government relies heavily on income tax to function. In 2022, income tax was almost 54% of the government’s revenue, so changes to income taxes have a HUGE impact on the government’s ability to do anything. And considering that 80% of all income taxes are paid by only about 10% of taxpayers (earning $200k+), and that filers making less than $50k actually got money back after paying no income taxes…well, that’s why you piss someone off no matter what you do.
🔥Bottom line: Most would agree that our tax system leaves a lot to be desired, and needs to be “fixed.” The challenge is…what exactly should be fixed, and how do you do that? It may seem simple in concept, but it’s really not at all simple to get it done. Do we need it to happen? Absolutely. Is it likely to happen anytime soon? Absolutely not.
How do you think the tax code should be changed?
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