The United States government is currently considering the idea of making major changes to the current tax system. Taxes are a complicated issue. It’s hard to wrap our heads around how a progressive tax rate system works, which is what we use here in the United States. We have to remember that people in higher tax brackets don’t start paying higher rates until they hit the higher earnings marks. In other words, if one person makes $50,000 a year and the other makes $70,000, they both get charged the same tax rate on the first $50,000. So the higher tax rate is only applied on $20,000 of the higher earner’s income. With that, we need to take into account that taxes are collected on the local, state, and federal level. The United States, in effect, has a flat tax system (when you consider the taxes paid on the state and local level).
Taxes are used to pay for a TON of things. The Military expenses are multifaceted and cover anything from equipment such as computers and fighter jets to benefits for retired service people. Taxes are used to provide health care to the elderly population in the form of Medicare and for other needy people in the form of Medicaid. Taxes help pay for scientific research, housing, unemployment benefits, debt interest payments, transportation, education, agriculture. These things often seem like broad concepts but if a person gets a scholarship to attend college that is provided thru a federal program then it is paid for with tax dollars. If I get medical treatment that was developed thru a research grant, then I benefited from that contribution. Even debt payments keep our nation from getting a low credit rating, which helps many Americans in a variety of ways. The list goes on forever. I do not agree with all the expenses on the list, but the point is, taxes pay for a lot of things.
Candidates for political office often make outrageous promises. Bernie Sanders suggested government cover the costs of education and health care for everyone. This is not an impossible task, it’s just a long way off from where we currently are. Donald Trump proposed huge tax cuts. Again, this not an impossible task it’s just a major shift from the current status. It will be interesting to see how well president Trump can fulfill his campaign promises in regards taxes and what solutions our politicians can find for keeping us too far out of the red.
Here’s how the current proposals breakdown. They are aiming to have things sorted out by T-day, which would be record breaking. In the meantime, hang on to your wallets.
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