Income Taxes ? Who Pays More? | Finance information

You

: Do rich people pay more tax? Seems to depend on who you listen to.

Yes, for two reasons. . And no more for two reasons

You: You?re arguing with yourself publicly

Perhaps, but a straightforward answer to this question does not exist. You?ll be ready to have this debate with others soon.

Why the rich pay more tax

Reason 1

Often the rich have high incomes. Since income taxes are based on a percentage of one?s income, those with higher taxable incomes will pay more. This is just basic math. If you multiply a specific tax rate by a bigger taxable income, the product is bigger, and so is the tax bill.

Reason 2

The federal tax system is progressive. This means that the tax rates increase as taxable income rises Themselves. Therefore, when you do the simple math above, both numbers (the taxable income and the tax rate) are higher for high-income earners than for those who make less. As a result, the higher wage earner?s tax bill Increases dramatically.

Why the rich do NOT pay more taxes

Reason 1

Remember, it is not gross income but not taxable income (income after subtracting your deductions) that deterministic mines your income tax. Rich people are more likely to have higher deductions due to their corresponding larger mortgages, state income taxes, and property taxes. These large deductions Significantly reduce the amount of wealthy people must pay.

Reason 2

Like it sounds, federal income tax is based on income, not wealth. If you?re worth a million dollars yet have little taxable income, you might not pay it at all Take the extreme example (and one I?ve seen first-hand) of a multi-millionaire family where neither parent is employed nor does Anything to generate significant income. Combined with enormous mortgage deduction at, they might pay no federal income tax.

Furthermore, high income does not mean you?re rich any more than a comparably lower income means you?re poor. Becoming comfortable (and even rich) is influenced much more by your financial habits more than your income level. ? Do not believe it

You: I?m not convinced yet

I know you?ve heard stories about celebrities who make piles of money yet wind up later in life with. little money or even in bankruptcy. While celebrities get all the press, this tragic story is a sad reality for many others too-not just entertainers and professional athletes.

If you spend 100 percent or more of your income, no matter how high that income is, you will find it difficult to become wealthy. The opposite is true also. . If you save enough money for a long period of time, you can be quite wealthy without ever earning a high income

The conclusion is simple: some people never paid high taxes but are now rich, while some folks once paid a ton of taxes and are no longer wealthy.

Ultimately, there are just too many factors to permit a blanket answer to the question ?Do the rich pay more in taxes?? It?s like Obtaining a true understanding of how much money the Jones? really have. While it?s likely a rich household pays more income tax than a poor one, you can not be sure.

Pay less tax yourself

The important thing is to pay the least amount of tax ( legally, of course) and to pay it as late as (again, legally) possible. Do not get a huge refund and do not save a couple hundred bucks in tax prep fees at the expense of missing a deduction $ 1,000. Tax preparers can help, but if you?re filling out a 1040-EZ, you will not miss the deduction, so save your money and do it yourself!

id=?article-resource?>

Michael is:

Michael B. Rubin, CPA, CFP, MBA is the author of Beyond Paycheck to Paycheck So the founder of Total Candor http://www.totalcandor.com , a financial planning education company, Which may be best explained by what it does not do: sell financial products. Rather, Michael and Total Candor simply Provide the unbiased financial education you wish you had already received. Total Candor tax preparation can help you with your tax needs, but if you?re filling out a 1040-EZ, you will not miss the deduction, so save your money and do it yourself!

As a true expert gifted in simplifying money matters, Michael has appeared in various media, including Fox News Chicago , radio stations across the country, and national media as seeking latimes.com , The Wall Street Journal , SmartMoney.com , Financial Advisor Magazine , and Investment News

/ p> Article Source

.:

Source: http://www.lovefinanceinfo.com/2012/08/income-taxes-who-pays-more/?utm_source=rss&utm_medium=rss&utm_campaign=income-taxes-who-pays-more

international womens day joe the plumber lra lra eric johnson eric johnson big east tournament