Talk:Taxation in the United States

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Contents

[edit] Start

..."The income tax forms the bulk of taxes."...

There are two possible interpretations of that; one is true for most people and one is false. It could mean that the largest portion of the average taxpayer's burden is the income tax (true for most people, but not all), or it could mean that the largest source of revenue for the US government is the income tax (which is false). Please calrify. --LDC

This needs to be put on a different page. I'm not sure what, though. Perhaps United States/Taxation (!!) or perhaps Taxation in the United States or perhaps United States--Taxation. KQ should know the answer.  :-) --LMS

"Taxation in the United States" sounds like a good article title to me, and of course it needs to have sections (or subpages) of its own for different historical periods). --LDC

The best available information about U.S. total revenues is probably: http://www.fms.treas.gov/mts/mts0601.pdf Which does indicate that income taxes are the bulk of Treasury revenue. It's fine with me if it moves... Ray Van De Walker

Sure enough (though Social Security is pretty close); I guess my impression was out-of-date (I know that in the past, individual income tax wasn't the biggest source of revenue--I'll have to look that up). --LDC

A grammer/clarity request: is there a word or two missing from the phrase:

' Self employed people pay the entire 15.3%. Above these payroll taxes presumably pay into the Social Security Trust Fund and Medicare Trust Funds that they will then draw on when the worker grows older. ' ?

I get the idea of what the author is trying to say but clearer wording would be great. Thanks! -JMH

Well, please do move it then. (See naming conventions.)

According to that document, p. 5, the estimate for the next year is about half. Perhaps we can be more specific, anyway. I think the subject of this article is payroll taxes. It ignores all the "hidden" taxes and tariffs that are also paid by various entities (and passed on to the consumer), such as business taxes and taxes on alcohol.

Also, it needs to be clarified if the subject of the article is U.S. federal government taxation, or any taxation that occurs within the borders of the U.S.

Finally, the percentages here need to be dated (was that all last year, or what?) --LMS

As a new and anonymous user I am hesitant to edit straight to the article, but here is a relavent bit to the above notes: the textbook "Individual income taxes", by Hoffman/Smith/Willis (c) 2007 Thomson South-Western, provides the following table concerning the total 2006 Federal budget receipts, broken down by category and percentage (Figure 1-1, p.1-4):

Individual income taxes 44%; Corporation income taxes 11%; Social insurance taxes and contributions 38%; Excise taxes 3%; Other 4%.

I hope a numeric table like this does not constitute copyright infringement. I apologize if it does. -JMH

Haha, no, "of course" I don't know the answer. "Taxation in the United States" sounds good. It could also go into more on sales tax, also the "non"tax on gasoline which is part of the final price and helps to offset the cost of new road construction. --Koyaanis Qatsi

Are the percentages and ceilings quoted in this article current? I thought the Social security tax was raised to over 7% more than a decade ago. some please confirm and correct.

They were the last month when I paid them... At one point Social Security was 7.6%, I seem to recall, but it was deducted up to a smaller maximum salary. Don't forget the hidden part of the tax: The same amount of tax is -also- paid by the employer, so you're losing a net of 12.4%. You're being silently screwed by that, because the employer could use that for your salary/wages- it's part of the same human-resources budget item. R.G. Van De Walker

Florida does not have a state personal income tax but it does have a crporate income tax. I'me changing to a more appropriate state for the example.

Shouldn't this article at least mention non-income taxes, such as tarrifs and exise taxes?

-Ben

This article is so inaccurate that it should be removed from the Wikipedia. I don't understand why people who don't understand it want to write an article on a topic this complex anyhow, but since you obviously do, will you people PLEASE move this to some sort of a 'project' page where you can fiddle with it to your hearts' content without misleading the people who might actually look at this article in the meantime trying to learn something about taxes? And then not bring it back here until you get at least one tax expert to review it for gross misstatements that could lead readers into criminal violations of the tax law? -- isis 18:24 Dec 9, 2002 (UTC)

The article seems to be going in three directions at once. On one hand, it's a description of how taxation works in the US, in a largely political context -- i.e. here is how the government collects revenue. On the other, it seems to also try to be a description of how the tax code affects the individual taxpayer. And then there's the rant in the middle about the unfairness of the ISO provisions of the AMT.
I suspect that you're really only objecting to the second and third points, and not the first, which strikes me as perfectly reasonable for a public work-in-progress.

pity the IRS cites case law and not the actual laws requested. oh well. (As a Canadian, I have no stake one way or the other; I'm just amused at the total mess the US has gotten itself into[1][2][3] =) I also wonder whether the wikipedian so quick to repeat what the IRS says read the heterodox material at all. I find WPians tend to lack that objectivity...see fluoride, in which I put more effort 'cause fluoridation can happen to me.)

Case law is actual law. U.S. law includes statutes, regulations, and case law. They're all law, and they're all binding. It's completely appropriate for the IRS to cite rules of law determined by courts in cases.

[edit] Tax Protestors

It seems to me that all those described in this section are people working out weird ways to avoid tax. They are all tax evaders pretending to be tax avoiders. A tax protestor is not this. A tax protestor is one who refuses to pay tax in order to protest something e.g. the liberation/invasion of Iraq. A true tax protestor files his/her tax return correctly working out the tax due and then refuses to pay some or all of that tax. What say you all? Am I right that these so called tax protestors are really tax refuseniks? Paul Beardsell 18:16, 1 Jun 2004 (UTC)


I'm pretty sure that's not the standard definition of Tax Protester. I've always heard the term used to describe people who dispute the legality of the tax, rather than people like Thoreau who acknoledge a tax's formal legitimacy but refuse to pay as an act of moral or political protest. Personally, I agree that these guys are really tax evaders who have convinced themselves of a convenient delusion, but the term "Tax Protester" really should refer to them.
A quick Google search shows the entire first page to be composed of these evasion-style Tax Protestors, rather than of any other sort. For more on this, see the Tax Protestor FAQ: http://evans-legal.com/dan/tpfaq.html, from which the following quote from the Seventh Circuit comes:
"Some people believe with great fervor preposterous things that just happen to coincide with their self-interest. 'Tax protesters' have convinced themselves that wages are not income, that only gold is money, that the Sixteenth Amendment is unconstitutional, and so on. These beliefs all lead--so tax protesters think--to the elimination of their obligation to pay taxes." Coleman v. Commissioner, 791 F.2d 68, 69 (7th Cir. 1986).
Ben 18:43, 4 Jun 2004 (UTC)

Haha! Thanks for the link to the FAQ from which I quote below. He specifically only addresses one of the two types of "tax protester":

What is a "tax protester"?
The phrase "tax protester" is commonly applied to two types of people:
  • People who refuse to pay taxes in order to protest policies of the federal government that are supported by those taxes (such as people who refused to pay taxes during the Vietnam War); and
  • People who refuse to pay taxes or file tax returns out of a mistaken belief, firmly held, that the federal income tax is unconstitutional, invalid, voluntary, or otherwise does not apply to them under one of a number of bizarre arguments, most of which are described in this FAQ.
This FAQ uses the phrase "tax protester" in the second sense, referring to people who refuse to file returns or pay taxes because of ridiculous and far-fetched arguments against the validity or application of the tax laws. (See the above explanation of the purpose of this FAQ.)

Paul Beardsell 04:27, 5 Jun 2004 (UTC)

[edit] Federal Withholding Tax

Since there is no mention of Federal Withholding Tax in the current version of this article, I'm going to go ahead and add something in. Why should the current tax article mention direct withholding but this article on U.S. taxation does not? Zzyzx11 03:51, 14 Feb 2005 (UTC)

[edit] State sales tax

I came to this page looking for information on the cross-state issues related to state taxes:

  • What happens when someone lives in one state an works in another, or moves around a lot, or has more than one residence.
  • What happens when purchasing goods from other states? E.g., over the internet?

Jake

1. It varies by state. Say you live in Massachusetts (a state with income tax) and work in New Hampshire (a state with no income tax). You'd still owe income tax to Massachusetts. If you work and live in two different states with income taxes, you may owe tax to both states. However you'll receive a credit for tax paid to other jurisdictions, meaning you won't be taxed twice for the same income. 2. When you buy goods from other states, there is no sales tax if the business has no presence in your home state. However you may still owe use taxes to your home state. As people buy more stuff over the Internet, expect states to crack down on people who don't pay use taxes on big ticket out-of-state purchases.
Yep, you're right. All this stuff should be in the article. This article could use a revamping. Rhobite 21:05, Apr 3, 2005 (UTC)

I feel compelled to edit this paragraph in particular:

  • Inflation and Tax Brackets

"Most tax laws are not accurately indexed to inflation. Either they ignore inflation completely, or they are indexed to the consumer price index, which tends to understate real inflation. In a progressive tax system, not indexing the brackets to inflation has the effect that there is a tax increase every year, even if Congress passes no tax law. That is because an individual's income will naturally go up at the inflation rate, and the progressive taxation system causes him to pay a greater percentage of his income in taxes."

I thought the consumer price index overstated inflation, since it tracks the prices of a fixed 'basket' of items, whereas in fact people will buy similar substitute items is the price of one of them rises too much. (One frequently cited example would be buying margarine instead of butter.)

I'd like to change 'understate' to 'overstate' and also modify the line 'an individual's income will naturally go up at the inflation rate' to something like 'an individual's income will often rise at the inflation rate'. Many people receive annual raises, but these are more closely tied to increases in skill than to inflation. --Heian-794 2 July 2005 11:11 (UTC)Heian-794

I agree with the suggestion to change 'understate' to 'overstate' since it agrees with what I was taught in Economics. I did a quick Google search and that found most sites to support this, although there were a few skeptics. However, I didn't find anything that stated that the CPI understates inflation, so I think it is safe to make this change. Also, I think that the second change suggested about some of the wording is appropriate, although not critical. Since I am not a member, I am hesitant to make any direct changes to the article, so someone else probably should. --66.69.209.199 18:52, 29 July 2006 (UTC)

[edit] Tax "Burden"

I think this term needs to be explained. Reading this article, without much knowledge about taxation, makes it sound POV; but from hearing the term elsewhere, I'm assuming it's probably an acceptable term, though it sounds like POV to someone who isn't familiar with it, namely that people are overtaxed. If this is the case, I recommend moving it (not everyone believes we are overtaxed, a case in point was Bush's wanting to lower taxes when many polls showed most Americans felt taxes were at the proper level). It essentially becomes a political statement (that is, conservative vs. liberal). --Rt66lt, August 24, 2005

One of the definitions of "burden" is "a responsibility or duty;" for example, the "burden of proof." In taxation parlance, the term "burden" carries that connotation and (usually) no more; in all of my taxation classes and work experience, the term is used as a description of someone's obligation to pay, not as a political commentary. Perhaps I've become inured to the potential misinterpretation, but if others feel the same way I'll add an explanation to the article.
--Nathan Patterson, May 4, 2006
The term "tax burden" may have some remote prejudicial connotations but it is the accepted term for the direct obligation to pay taxes. Note that this usually means the legal incident of taxaction (e.g. social security is paid 50% by employee and 50% by emplyer), not the economic or effective incident (which in case of payroll taxes is more like a 20/80 split in favor of employers). sebmol 08:47, 4 May 2006 (UTC)

[edit] Tax "Code"

The use of the term "tax code" in the opening paragraphs is confusing for a UK reader because a "tax code" in the UK is a number allocated to each individual by HM Revenue and Customs and used in the PAYE system.

  • Thanks for the suggestion, I added a parenthetical explanation of the term. Turnstep 12:58, 1 December 2005 (UTC)


[edit] POV

I don't know anything about tax law, but to my ear, the following sentence sounds POV: "Often the receipts intended to be placed "trust" funds are used for other purposes, with the government posting an IOU ('I owe you') in the form of a federal bond or other accounting instrument, then spending the money on unrelated current expenditures." I suspect it because, I think, some people have an ideological opposition to government taxation, and "IOU" and "unrelated" seem unnecessarily, ah, sarcastic. I don't ever post on talk pages, so if someone qualified on this topic thinks this is silly, please delete.

  • No need to delete, it's a valid concern. I don't agree, however, that it is POV. Poorly worded, perhaps, but a generally accurate statement. Turnstep 12:58, 1 December 2005 (UTC)

[edit] Minor edit regarding Form W-4

I removed the language to the effect that the W-4 is "maybe the most important tax form the employee will ever prepare". Yes, it's an important form, but I argue that it pales in signficance when compared with the individual's Form 1040 return. Signing and submitting a Form W-4 to an employer does not impair any significant right of the taxpayer. The W-4 is simply an instruction to the employer as to how much Federal income tax to withhold, and of course does not determine the taxpayer's tax liability.

On the other hand, filing an incorrect Form 1040 can have massive legal consequences for a taxpayer, even if the error is unintentional. The classic example is filing a Form 1040 that incorrectly overstates the tax liability. Once the Internal Revenue Service processes that return, the incorrect tax amount is formally "assessed" -- and the right of the taxpayer to contend with the IRS over the correct amount of tax is thereafter sharply curtailed. Filing a Form 1040 is arguably a much more serious proposition for taxpayer than submitting a Form W-4 to an employer. Famspear 15:09, 19 January 2006 (UTC)

W-4 vs. 1040 What do they do, which is more important, and why? The W-4 controls the timing and amount of movement of money to the govenment. The Form 1040 is a reconciliation which advises the government how much the taxpayer says is OK to collect. The Form 1040 is not intended to impair any significant right of the taxpayer.

The filing of an incorrect Form 1040 can be corrected if errors are made, and there is a process for doing so. The right to correct a return that has been "processed" and tax "assessed" is not intended to be curtailed by the IRS activity.

The determination of the correct amount of tax to be assessed is the final step in the process of determining the amount of money the government may collect from the taxpayer each year. While penalties may be assessed related to amounts shown on the Form 1040, they may be avoided by the use of a Form W-4 or simliar form. Form W-4 makes money move, 1040 makes money stick. Which is more important is a decision each person can make. Ken 01:37, 21 January 2006 (UTC)

[edit] "Progressive Nature of Income Tax" section is problematic

The two central claims here are that "the U.S. income tax is highly progressive" and that its progressivity "has gradually increased over recent decades". The section does not back these claims with a single fact or citation. Saying that "the top 20 % of taxpayers paid approximately 56 % of all taxes in 1980, and this figure gradually has risen to 65 %, as of 2001" doesn't prove anything. The fact that a small minority pays bulk of the total tax volume, and that that bulk is becoming bigger and bigger might as well be explained as follows: 1) there exists a super-rich minority, and 2) that super-rich minority is getting richer and richer (and hence paying more and more taxes). That would have nothing to do with "progressivity"; in fact, same situation would entail the same outcome even with a perfectly flat tax. GregorB 11:57, 4 March 2006 (UTC)

I think if the word "highly" were dropped [which I would have done myself if there wasn't a dispute flag on this section], it would eliminate the POV issue. "Highly Progressive" is an opinion. "Progressive" is a fact by defination since a "progressive income tax" is defined as an income tax system with multiple rates where the declared rate increases as income does. Joncnunn 16:35, 11 April 2006 (UTC)

I agree: it is progressive by definition. But still: is it more progressive now than e.g. a decade ago? The section attempts to "show" that it is, but the citations are misleading in that respect. Numbers quoted are irrelevant to the subject ("Progressive Nature of Income Tax"). Removing "highly" would help, but unfortunately not much. Ripping quotations altogether would be better, but these are actually useful pieces of information (if used elsewhere in the article, that is), so I'm really reluctant about doing it... GregorB 16:36, 12 April 2006 (UTC)

Another problem with the so-called progressive nature of the US system: The brackets basically divide the population into the poor, lower- and mid- middle class, and then upper-middle class and up. Thus, the top bracket is decidedly UNprogressive, as it includes a large spectrum, from people in the upper-middle class to the ultra-rich. Furthermore, the system is even less progressive at higher incomes, due to legal forms of tax evasion, primarily incorporation.

[edit] A brief history of Federal income tax rates and brackets

On the question of progressivity of the Federal income tax in the United States. As far as progressivity in the sense of the number of income brackets and the progression of rates from lower rates to higher rates as income increases, here are some statistics.

For what it’s worth, I believe the highest marginal tax rate in the early 1950s was above 90%.

Here is a partial history of changes in the Federal income tax rates since 1979:

Year 1979: 15 income brackets; rates ranged from 14%-70%

1982: 12 brackets; 12%-50%

1987: 5 brackets; 11%-38.5%

1988: 3 brackets; 15%-33%

1991: 3 brackets; 15%-31%

1993: 5 brackets; 15%-39.6%

2001: 5 brackets; 15%-39.1%

2002: 6 brackets; 10%-38.6%

2003-2005: 6 brackets; 10%-35%

Source: Internal Revenue Service, Instructions for Form 1040 (for each year listed)

Yours, Famspear 03:29, 13 April 2006 (UTC)

Thank you, this is very illustrative... The data you quote seems to refute the article's thesis: there is no apparent trend towards higher progressivity - on the contrary. However, there are still some unknowns left:
  1. Bracket cutoff
  2. What is deductible and what isn't
  3. How do taxes other than Federal income tax (sales tax in particular) come into picture
This is very complex stuff: many variables subtly affect the outcome... GregorB 20:06, 14 April 2006 (UTC)


[edit] Year 1978 tax rate schedule for single (unmarried) individual

Yes, it's exceeding complex all right. And here are some more goodies to chew on: the tax rate schedule, for U.S. Federal income tax purposes, for the calendar year 1978 for a single person:

If the taxable income is: The tax is:

Not over $2,200 ....................... No tax.

Over $2,200 but not over $2,700 ....... 14% of the excess over $2,200.

Over $2,700 but not over $3,200 ....... $70, plus 15% of excess over $2,700.

Over $3,200 but not over $3,700 ....... $145, plus 16% of excess over $3,200.

Over $3,700 but not over $4,200 ....... $225, Plus 17% of excess over $3,700.

Over $4,200 but not over $6,200 ....... $310, plus 19% of excess over $4,200.

Over $6,200 but not over $8,200 ....... $690, plus 21% of excess over $6,200.

Over $8,200 but not over $10,200 ...... $1,110, plus 24% of excess over $8,200.

Over $10,200 but not over $12,200 ..... $1,590, plus 25% of excess over $10,200.

Over $12,200 but not over $14,200 ..... $2,090, plus 27% of excess over $12,200.

Over $14,200 but not over $16,200 ..... $2,630, plus 29% of excess over $14,200.

Over $16,200 but not over $18,200 ..... $3,210, plus 31% of excess over $16,200.

Over $18,200 but not over $20,200 ..... $3,830, plus 34% of excess over $18,200.

Over $20,200 but not over $22,200 ..... $4,510, plus 36% of excess over $20,200.

Over $22,200 but not over $24,200 ..... $5,230, plus 38% of excess over $22,200.

Over $24,200 but not over $28,200 ..... $5,990, plus 40% of excess over $24,200.

Over $28,200 but not over $34,200 ..... $7,590, plus 45% of excess over $28,200.

Over $34,200 but not over $40,200 ..... $10,290, plus 50% of excess over $34,200.

Over $40,200 but not over $46,200 ..... $13,290, plus 55% of excess over $40,200.

Over $46,200 but not over $52,200 ..... $16,590, plus 60% of excess over $46,200.

Over $52,200 but not over $62,200 ..... $20,190, plus 62% of excess over $52,200.

Over $62,200 but not over $72,200 ..... $26,390, plus 64% of excess over $62,200.

Over $72,200 but not over $82,200 ..... $32,790, plus 66% of excess over $72,200.

Over $82,200 but not over $92,200 ..... $39,390, plus 68% of excess over $82,200.

Over $92,200 but not over $102,200 .... $46,190, plus 69% of excess over $92,200.

Over $102,200 ......................... $53,090, plus 70% of excess over $102,200.

Source: CCH Tax Research Network. Yours, Famspear 22:59, 14 April 2006 (UTC)

Famspear, I think I'm your fan... GregorB 09:35, 15 April 2006 (UTC)

OK, now I have added a chart showing the Federal income tax rates imposed on a single (unmarried) individual by the original '54 Code -- see the article on the Internal Revenue Code of 1954. The highest rate was 91%. Yours, Famspear 22:37, 19 April 2006 (UTC)

Tax year followed by top tax rate for that year follwed by the level at which the top tax rate was imposed.

1913 7 500,000

1914 7 500,000

1915 7 500,000

1916 15 2,000,000

1917 67 2,000,000

1918 77 1,000,000

1919 73 1,000,000

1920 73 1,000,000

1921 73 1,000,000

1922 58 200,000

1923 43.5 200,000

1924 46 500,000

1925 25 100,000

1926 25 100,000

1927 25 100,000

1928 25 100,000

1929 24 100,000

1930 25 100,000

1931 25 100,000

1932 63 1,000,000

1933 63 1,000,000

1934 63 1,000,000

1935 63 1,000,000

1936 79 5,000,000

1937 79 5,000,000

1938 79 5,000,000

1939 79 5,000,000

1940 81.1 5,000,000

1941 81 5,000,000

1942 88 200,000

1943 88 200,000

1944 94 200,000

1945 94 200,000

1946 86.45 200,000

1947 86.45 200,000

1948 82.13 400,000

1949 82.13 400,000

1950 84.36 400,000

1951 91 400,000

1952 92 400,000

1953 92 400,000

1954 91 400,000

1955 91 400,000

1956 91 400,000

1957 91 400,000

1958 91 400,000

1959 91 400,000

1960 91 400,000

1961 91 400,000

1962 91 400,000

1963 91 400,000

1964 77 400,000

1965 70 200,000

1966 70 200,000

1967 70 200,000

1968 75.25 200,000

1969 77 200,000

1970 71.75 200,000

1971 70 200,000

1972 70 200,000

1973 70 200,000

1974 70 200,000

1975 70 200,000

1976 70 200,000

1977 70 203,200

1978 70 203,200

1979 70 215,400

1980 70 215,400

1981 69.13 215,400

1982 50 85,600

1983 50 109,400

1984 50 162,400

1985 50 169,020

1986 50 175,250

1987 38.5 90,000

1988 28 29,750

1989 28 30,950

1990 28 32,450

1991 31 82,150

1992 31 86,500

1993 39.6 89,150

1994 39.6 250,000

1995 39.6 256,500

1996 39.6 263,750

1997 39.6 271,050

1998 39.6 278,450

1999 39.6 283,150

2000 39.6 288,350

2001 39.1 297,350

2002 38.6 307,050

2003 35 311,950

2004 35 319,101

2005 35 326,450

The article reads a little anti-tax to me.

[edit] Sources of Tax Statistics

Since federal income tax return information is protected from disclosure by law (such as IRC 7216) the best (and often only) source of statistics is the Internal Revenue Service. Such statistics are reported in excrutiating detail in the quarterly IRS Publication 1136, "The Statistics of Income Bulletin". Questions can be resolved by contating the Statistical Information Services of the IRS at sis@irs.gov. This publication is available on line (current issue at http://www.irs.gov/taxstats/productsandpubs/article/0,,id=151971,00.html). For those such as myself who began before the IRS had a website, or who wish to keep earlier volumes for reference, the subscription cost is $53 per year for paper copy.

The SOI runs about 350 pages per edition, contains numerous charts and tables, and has footnotes regarding methodology for researchers. Especially useful would be the 80+ pages of historical and time-series data at the end of each bulletin. Often information is broken down by level of income reported (either Adjusted Gross Income or Total Positive Income, depending on application). Table 18 entitled "Treasury Department Gross Tax Collections: Amount Collected by Quarter and Fiscal Year, 1987--2004" is displayed in Excel format at www.irs.gov/pub/irs-soi/histab18.xls. This table indicates that in fiscal 2004, total tax collections were $2,035,472 million; of which $717,247 million were employment taxes which pass directly to the Social Security trust fund and the FUTA trust fund. Individual income taxes accounted for $990,249 miillion and corporate income taxes were $230,619 million.

Read and enjoy.

[edit] Disproportionate?

History: "The lowest earning workers ($20,000 in 2000) pay no income taxes as a group and actually get a small subsidy from the federal government because of child credits and the Earned Income Tax Credit. Notably, however, lower income individuals pay a disproportionate share of payroll taxes for Social Security, Medicare, Unemployment Insurance, and the like. All income earned is taxed at 7.65% on the employee with an addition 7.65% payment incurred by the employer." (emphasis added)

Is it really disproportionate? If everybody pays 7.65% regardless of income level, isn't that one of the few taxes that is proportionate? Furthermore, lower income individuals receive the Earned income tax credit. Either I am mistaken or the relative value of "disproportionate" when it comes to taxation has become so perverted that I am surprised there has not been a revolt. Regardless, this statement is unclear and needs revision or clarification. 64.3.57.179 19:47, 13 March 2006 (UTC)

Dear fellow readers: Here's the answer. Lower income workers do pay a disproportionately larger share of Federal payroll taxes (Social Security tax withheld and Medicare tax withheld) in terms of what is called the "effective tax rate." Here's why.
The statement "[a]ll income earned is taxed at 7.65%" is incorrect. Of the 7.65%, a total of 6.2% (i.e., the Social Security tax) applies only to earnings up to a point, adjusted for inflation each year (the income amount is $94,200 for the year 2006, for example).
So, comparing a worker with gross wages of $20,000 versus one with $200,000 for 2006, the $20,000 wage earner is paying payroll tax at a 7.65% effective rate, while the $200,000 wage earner is paying payroll tax at about 4.37%, as follows:
Worker earning $20,000:
Social Security tax = $20,000 x 6.2% = $1,240.00
Medicare tax = $20,000 x 1.45% = 290.00
Total SS & Med tax withheld: $1,530.00, which is 7.65% of $20,000.
Worker earning $200,000:
Social Security tax = $94,200 x 6.2% = $5,840.40
Medicare tax = $200,000 x 1.45% = 2,900.00
Total SS & Med tax withheld: $8,740.40, which is only about 4.37% of $200,000.
By the way, workers generally pay no Federal or state unemployment insurance tax. I don't know the law of every state, but every state of which I am aware (as well as the Federal law) imposes the tax only on the employer. Yours, Famspear 21:41, 13 March 2006 (UTC)

That's very helpful Famspear, thanks for clarifying. Best, 68.80.237.199 23:30, 13 March 2006 (UTC)

Wow. I just found a mistake in my March 13, 2006 edits on the payroll taxes. Obviously, since the worker with lower income is paying at a 7.65% effective rate while the worker with the higher income is paying (in the example given) at only a 4.37% effective rate, the lower income worker is paying at HIGHER rate than the high income person. My March 13th edits incorrectly said the low income person was paying "lower." I have made the correction in the article. Yours, Famspear 01:57, 20 April 2006 (UTC)

[edit] Merge?

There is another income tax in USA article. John wesley 15:22, 28 April 2006 (UTC)

Ah, but this article is not on income tax, but all forms of taxation used in the U.S. (property tax, estate tax, sales tax, etc.). This article should remain separate, but redundancy between the two should be minimized. Cheers! BD2412 T 15:28, 28 April 2006 (UTC)
Excise taxes and tariffs eh? John wesley 15:29, 28 April 2006 (UTC)
Those too, I suppose. BD2412 T 15:39, 28 April 2006 (UTC)

[edit] Tax Advice

Wikipedia is a great resource tool and a growing community. However, as tempting as it is to solicit legal or financial advice from a community of helpful individuals, most accountants and lawyers will tell you that they cannot offer you much advice over the Internet. There are simply too many variables that factor into an individual's situation for advice to be complete based off of limited interaction and knowledge of relevant facts.

To the anonymous user who asked about taxation of a corporation in San Francisco, CA, United States, and who was evidently located in Russia: you could probably start by searching for an accountant in San Francisco. This could be accomplished by Googling the term "San Francisco CPA." A San Francisco-based CPA may be able to point you in the right direction; however, you should start there, not an online encyclopedia.

Additionally, please direct any future comments to me to my personal talk page, not this article. NathanPatterson 10:15, 17 May 2006 (UTC)

[edit] Tax return

What will happened, if tax return not ready yet? Where can i find information about this question?

[edit] Idea for New Article

I am considering writing an article on timing concepts in Federal income taxation and related case law. For example, the constructive receipt, economic benefit, and claim of right doctrines, an elaboration on cases regarding the cash method versus accrual method of accounting, etc. Does anyone think this would be worthwhile or appropriate for Wikipedians? I would outline the various doctrines at a high level and give some of the landmark cases in each category. Nathanpatterson 04:48, 30 May 2006 (UTC)

[edit] Revert apparent copyright violation

On 24 June 2006 certain material was added to the article, much of it apparently copied from http://www.papillonsartpalace.com/decoding.htm

for which copyright is claimed by WorldNetDaily.com

I removed the inserted material.

Yours, Famspear 23:03, 24 June 2006 (UTC)

[edit] More progressive, less progressive - ah, let's call the whole thing off

I have made some edits to the article to remove what I contend are some unverifiable comments regarding progressivity. I argue that enough actual data has now been printed in the relevant articles that each reader can evaluate the increases or decreases in the "progressivity" of the Federal income tax in the USA over the years.

Obviously, in "recent decades" the top marginal rates (for example) have gone both up and down. And just as obviously, the top marginal rates are a lot lower than they were in 1954 or in the late 1970s. Whether you argue that the income tax is currently "too progressive" or "not progressive enough," you can now perhaps find some "data" in Wikipedia to provide some support for your position. However, I argue we should try to keep the texts of the articles themselves as neutral as possible. See Progressive tax and Internal Revenue Code of 1954. Yours, Famspear 20:20, 5 July 2006 (UTC)

PS: In commenting on the top margin rates, I do not mean to imply that comparing the top tax rate in year A with the top rate in year B would be the only possible way to measure "progressivity." Also, I don't have a strong personal opinion one way or the other about whether the U.S. Federal income tax is "too progressive" or "not progressive enough." Famspear 20:30, 5 July 2006 (UTC)

[edit] Table

Although I think the table at the top of the article is pretty helpful for comparison etc. From looking at the page it has been lifted from, some of it appears, to me at least, to be slightly misleading, or a little unclear.

The source says that it uses "the combined effects of personal income tax, employee and employer social security contributions, payroll taxes and cash benefits". I am only approaching this from the point of view of taxation in the United Kingdom (the only system I know) but with "a family with one wage-earner and two children", as stated in the linked article, on the UK average wage of $30,470 would pay $4,114 in Income Tax and $2,261 in National Insurance contributions bringing it to a total of $6,375. This would translate rougly into 21% of earnings and not 27.1%, and with two children would be entitled to $4,971 in Child Tax Credit (a "cash benefit"?) which would result in a net liability of $1,404.

Perhaps the table has factored in comparable child tax credits and the like from the United States and the other nations but this is not mentioned although the article does have a quote saying "Citizens in these other countries are paying more money, but they are getting more back, in terms of social programs", I do not know if the UK Child Tax Credit is included as a social program rather than a "cash benefit".

Obviously local taxes, sales taxes and motoring taxation would mean that a citizen of the UK would pay more than the net of $1,404 over a year, but these do not come under "personal income tax, employee and employer social security contributions, payroll taxes and cash benefits".

I appreciate that the Organisation for Economic Co-operation and Development is a pretty reliable source, and I am not, nor pretend to be, an expert in economics but I wondered if anyone else thought the table was a little misleading? Benson85 00:38, 13 August 2006 (UTC)

[edit] Exemption for Churches - History

I don't know the history, but it would be useful to see it here. When were churches given tax-exempt status? I think that a law in the 1940s created the non-profit exemption, but I suspect churches had exemptions before that, even if only on a state-by-state basis. I'm not sure if any court cases have come up against this, either, but they'd be useful links for that, since there is a clear contradiction between the 1st Amendment and this exemption.

[edit] Different source?

From the article: "The argument that the Sixteenth Amendment was "never ratified" has been rejected by the Internal Revenue Service and by the courts [5] and found to be a frivolous argument."

Refering to a court decision by linking to an IRS.gov article is pretty ridiculous from a NPOV, it also doesn't convince the income tax protestors. I changed it into "[...] Internal Revenue Service [5] and the courts (source?) [...]". I suggest linking to court orders directly (or authorative summaries) instead of a huge 63 page document by the IRS. [Preceding commentary added by anonymous user at IP 194.109.22.149 on 2 October 2006.]

Dear fellow editors: I have added citations to court cases where the courts specifically rejected the "Sixteenth Amendment was not properly ratified" argument.
Also, Wikipedia is here to inform, not to "convince" or persuade. Linking to or citing an IRS document regarding tax matters is in no way "ridiculous," and has nothing to do with non-neutral point of view. Please go back and read the Wikipedia guidelines. However, the anonymous user is correct to the extent he or she implies that actual court decisions are, from a legal standpoint, much better authority than an assertion by the IRS on its web site. Court decisions are Primary authority. The material on the IRS web site consists of mixtures of primary authority and Secondary authority. Actual texts of statutes, regulations, actual holdings (rulings) by Federal courts, etc., are much better. Yours, Famspear 17:07, 2 October 2006 (UTC)
Thank you very much, Famspear. One point though: would you agree with me that this information fits better together with other arguments from tax protestors, at Tax_protester_arguments, no matter if they are pro or anti their (specific) argument? I mean, why is one arguments here, and others there? I'd say, put them all together at Tax_protester_arguments instead. 194.109.22.147 03:46, 3 October 2006 (UTC)

Well, I pretty much agree. The situation in Wikipedia is that tax protester arguments keep getting inserted by new editors in the general tax articles such as Taxation in the United States, rather than in the related articles such as Tax protester, Tax protester arguments, Tax protester constitutional arguments, Tax protester statutory arguments, Tax protester conspiracy arguments, and Tax protester history. I am repeatedly moving material from the general tax articles to the tax protester articles where it can be presented more comprehensively. However it might not be feasible to put all tax protester material in one of the "tax protester" articles. Ironically much of the material I added here was copied and adapted from one of the other articles. I guess this is more of an "art" than a "hard science", as far as trying to figure where stuff fits the best. The material I added here is certainly duplicated elsewhere, so maybe some other editors may have some ideas. Should we just pare the tax protester stuff back down in this article, since it's already covered elsewhere? Any thoughts, anyone? Yours, Famspear 04:25, 3 October 2006 (UTC)

[edit] Tax distribution — Commentary/NPOV dispute

On Dec. 9, 2006, an editor inserted commentary about the section "Tax distribution" into that section (the new material is the part after the bullets):

[edit] Tax distribution

In the United States, the Congressional Budget Office produces a number of reports on the share of all federal taxes paid by taxpayers of various income levels. Their data for 2002 shows the following: (Table 2)

  • The top 1% of taxpayers by income pay 33% of all individual income taxes, and 22.7% of all federal taxes.
  • The top 5% of taxpayers pay 54.5% of all individual income taxes, and 38.5% of all federal taxes.
  • The top 10% of taxpayers pay 67.4% of all individual income taxes, and 50% of all federal taxes.
  • The top quintile (20%) pays 82.5% of all individual income taxes, and 65.3% of all federal

This interruption is to protest the bias in these statistics, and ask that the total amount of income earned for each of these groups be listed. For example: The top 1% of taxpayers by income pay 33% of all individual income taxes, and 22.7% of all federal taxes, and earn approximately XX% of all income. One will find that the taxes paid by group is equally near the percentage of national income earned by group. As stated, there is a misperception that the top 1% to 20% of the population is paying a disproportionate amount of the taxes, yet they earn most of the national income. The misrepresentation is commonly argued on political forums, on behalf of reducing taxes for the wealthy.

The added material is a commentary/discussion about the article and should be included on this talk page, not in the article itself. I've therefore moved it here. — Mateo SA (talk | contribs) 01:30, 10 December 2006 (UTC)

Postscript: Since the editor's concern seems to be that the above-mentioned section is biased, I've added the POV tag to that section. — Mateo SA (talk | contribs) 01:36, 10 December 2006 (UTC)
I've tried to update this per these comments. However, we may be duplicating the section "Progressive nature of income tax" - perhaps we should combine these and maybe rename the header. Morphh (talk) 14:00, 10 December 2006 (UTC)

[edit] History split

I think this section requires a lot of expansion and is currently sufficient to start its own article titled something like Taxation history of the United States. It should cover early American history as well such as the Boston tea party. Morphh (talk) 16:33, 5 January 2007 (UTC)

Support
  1. Morphh (talk) 16:33, 5 January 2007 (UTC)
Oppose
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