There has been much controversy in recent years regarding the rich and paying their fair share of taxes. The truth is, the rich are going to pay more in taxes this year — the Affordable Care Act, as well as the fiscal cliff deal, are the reasons why wealthy taxpayers are going to pay more this tax season.
As always, taxes are a hotly debated topic. The President remains strong on his stance that the wealthy should pay more on taxes, yet the rich feel they pay enough, and the middle and lower classes should make their fair share of contributions. The truth is, the wealthy already pay a great deal on taxes, and they are going to pay more this year, but that is justifiable for a variety of reasons. Just because the rich technically pay more, that does not mean they are being treated unfairly.
Where wealthy will pay more in taxes
Compared to last year, the wealthy are going to have to pay a bit more in taxes in various categories.
Here is a rundown of where the rich must pay more due to tax reform:
- Higher tax rate now at 39.6%, up from 35% (for individual filers making above $400,000 annually)
- Capital gains are now at 20%, previously set at 15%
- Must pay an increase of 0.9% on Medicare taxes (for individual filers making above $200,000 annually)
The increase in these areas can lead to thousands of dollars the rich are going to have to fork out this tax season. The problem is that the rich are still finding new ways to avoid paying taxes. This is hurting the economy in the long run, and contributes towards reducing economic growth in this country
The rich find ways to not paying taxes
The rich are notorious for not paying all of their fair share of taxes. They do this through tax avoidance, as well as tax evasion. Do not get tax avoidance mixed up with tax evasion, which is illegal. When a business avoids taxes it simply minimizes taxes through methods approved by the IRS. This is done by taking all legitimate deductions possible, then sheltering the income made from taxes by establishing employee retirement plans.
Tax evasion, on the other hand, is different and happens when there is no attempt to pay taxes at all. For the wealthy, tax evasion usually occurs when they hide their money elsewhere to avoid paying taxes. Most of the time, rich people place their money in bank accounts in different countries to avoid paying taxes.
The wealthiest people commit tax evasion every year. In fact, there are Senate hearings being conducted in an attempt to find a group of wealthy individuals who hid their money with Credit Suisse, a Switzerland-based bank. Because the wealthy have the means, they can sometimes find a way to avoid paying their fair share of taxes.
Therefore, asking them to pay a bit more in an attempt to help stabilize the economy is not reaching too far. The difference paid should not be so significant that the wealthy should feel wronged, especially since we all still live in one of the most powerful countries in the world. Wealthy people have the means to generate more money and help stimulate the economy further by pursuing additional business endeavors. All that is asked is that everyone pay their fair share of taxes — the goal is for taxpayers to eventually be able to pay less as the years go on.