smonical
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The federal tax system is progressive, in the sense that the rich pay a higher portion of their income in taxes. The state systems are mostly regressive when all taxes are considered. See the article below. |
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Centurion
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Actually, rich people are taxed at a higher rate. The problem is that they have so many tax loopholes, they end up paying less. |
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Ties that bind
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you mean there's a middle class........where? |
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sparhawk7322
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The wealthy pay a much larger percentage of their income in taxes. In some cases they have to make a dollar to keep a dime. |
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siriusmary
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When you consider all taxes - not just the taxes on income, the people who consume the most goods pay the most taxes. Taxes are more than income taxes: there are sales taxes (these add up if you have a lot of money to spend), state property taxes (some states), state income taxes, consumption and add-on taxes like gasoline and cigarette taxes that you don't even know about when you buy these things, etc.
So, the people that have the most money/income end up paying the most taxes since they have the most money to spend. |
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SCOTT D
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The wealthy pay the same 0/0 as middle and lower income on the first amounts of money they earn , but the rate increases as the amount increases. and they do have some tax advantages |
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James E
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Keep in mind that is moe than one tax system in the United States.
The income tax is progressive, as ADJUSTED gross income increases the tax rate increases. Some adjustments are phased out or limited at higher income. Tax credits are also reduced at higher incomes. Also, all income is not taxed at the same rate.
Ordinary income is taxed at a higher rate than capital gains
so somewhat whose income is primarily from investments MIGHT pay somewhat less tax depending upon circumstances.
Earned income is subject to both security and medicare tax at a flat rate. Social security tax is capped but the medicare tax is not. So again someone living off investments can receive a higher after tax income.
Oh. Forgot to mention the Alternative Minimum Tax. |
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Yishan
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The answer is actually rather complicated. The most accurate short answer is that SOME very wealthy people pay a smaller percentage of their income than middle-class people while others do not.
I'll try to list the major points and explain why you and your friends probably disagree, and why you're all partially correct.
The income tax on WAGES is progressive. What this means is that if you earn more from your job, you pay a larger percentage of it in taxes. So a person earning $1 million/year as a carpenter pays more taxes than a person making $100,000/year as a carpenter, who in turn pays more taxes than a person making $30,000/year as a carpenter.
You'll notice the numbers are a bit unreasonable (no carpenter makes a $1 million/year), which leads to the next point:
Not all people make money (different from "earn wages") in the same way. There are methods of making money that are more accessible to rich people which receive more favorable tax treatment, usually involving investments rather than wage income.
For example, if you buy a stock and hold it for more than 1 year, your gain is only taxed at 15%. Or, if you buy a stock and it pays dividends, the tax on those dividends is also taxed at 15%.
The wage income brackets range from something like 5% up to 35%. So if you are making $100,000 in WAGE income, you'll be in the 25% tax bracket, and pay about 25% of that in taxes.
However, if you happen to have $2.5 million dollars lying around and buy $2.5 million worth of a stock that pays a 4% dividend (i.e. you receive $100,000 in dividends that year) and that's your only income, you'll pay $0 in wage income, and only 15% of that is taxed, because it's dividend income. So a wealthy person who had a lot of cash could conceivable receive all of their yearly income in the form of dividends, which are subject to a lower tax rate. Many wealthy people do exactly this.
This is ONE example of how differences in different types of income are taxed differently - you could also buy $2.5 mil in stocks that grew by 4% in a year, thus incurring only the long-term capital gains rate. In general, the wealthy are more able to take advantage of these (i.e. you need $2.5 mil to do this, and wealthy people tend to have while the middle class doesn't), so there are cases where a wealthy person will pay less on their annual income than a middle-class person will who earns the same annual income via wages. This is not always the case, depending on the specific tax brackets involved, but most wealthy people also do spend the time to figure out how to ensure that they'll most likely be able to do it.
It is true that the wealthiest people pay the largest percentage of taxes, by dollars. They also own the largest percentage of the assets (possibly a larger percentage than the taxes), which is the primary reason this is the case. Very poor people also don't pay much (if any) in taxes, but it is true that as a percentage of income, upper-middle-class people whose income is primarily from wages pay the highest percentage. |
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Jeff S
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Yes and no, depending on what you mean by "wealthy".
Not all income is created equal and taxed equally. For example, the vast majority of people earn almost all of the their income from salaries and wages. This includes everything from ditch diggers to doctors. Wage income is subject to very high taxation, notably Medicare and Social security in addition to income taxes. This is a progressive tax system (as mentioned by the other poster), so the more wages you make the more you pay. At the extreme end, almost all of your income is taxed. That is why movie stars only make a couple of movies per year; the taxes are so huge that almost all of their earnings go towards the IRS. By this definition, your friends are correct.
If you consider the wealthy those people who earn most of their income from stocks, businesses ventures, real estate, and other non-wage activities, then they will pay much less tax since those are only taxed as income tax. At the extreme case, no tax is paid because taxes are due when an investment is sold; therefore, if a wealthy person's dividends and stock appreciation is reinvested and he or she does not sell it, then no tax is due. There is a social class in the US that derives most their income from these types of financial instruments and consequently pay less tax. Since they do not work for a living, many people regard them as wealthy. |
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