As we approach the fiscal cliff the PR machine will be running on both sides about the best solutions to reduce the budget deficit. If you are not familiar then in a nutshell, the Republicans say it is a spending problem and the solution is to overhaul entitlements to bring the budget back in balance. The Democrats believe it is a revenue problem and the solution is to increase taxes.
The solution on an appropriate tax level is beyond the scope of this blog; it is interesting to look at current tax levels and see how they compare to historical levels. Everyone feels like their taxes are increasing. Many people say they are paying an unfair burden of the total. The opposite being Warren Buffet but we should all be so lucky as to have enough money to want to pay more in taxes.
The New York Times has done a study on tax rates in the United States. In general it found the most people pay less in taxes today than they did in 1980. This is a carefully chosen point as the tax rates were reduced under the Reagan administration. So 1980 was a taxation peak that was only outstripped by the peak in 1990. Overall the rates for everyone are now below their 1980 levels.
The biggest tax reductions came to the highest income earners, those above $250,000. That is not to say they were too high before or too low now but the numbers do show their tax rates as declining more than other income brackets.
Some of the benefit comes from where the taxes were levied. The federal tax code is more progressive than state income tax codes. So the total paid by all income brackets by the state is much closer. So the relative burden to lower incomes is higher for state taxes. This explains some of the reason why higher income earners have seen the biggest decline in overall tax burden. For half a dozen states the income tax rate rose fast enough to outpace the reductions in federal tax rate.
This is all interesting but in the end what really matters is what your business and family have to pay in taxes. That is something that we can help you out with. As you prepare to do your 2012 income taxes then give us a call.
The solution on an appropriate tax level is beyond the scope of this blog; it is interesting to look at current tax levels and see how they compare to historical levels. Everyone feels like their taxes are increasing. Many people say they are paying an unfair burden of the total. The opposite being Warren Buffet but we should all be so lucky as to have enough money to want to pay more in taxes.
The New York Times has done a study on tax rates in the United States. In general it found the most people pay less in taxes today than they did in 1980. This is a carefully chosen point as the tax rates were reduced under the Reagan administration. So 1980 was a taxation peak that was only outstripped by the peak in 1990. Overall the rates for everyone are now below their 1980 levels.
The biggest tax reductions came to the highest income earners, those above $250,000. That is not to say they were too high before or too low now but the numbers do show their tax rates as declining more than other income brackets.
Some of the benefit comes from where the taxes were levied. The federal tax code is more progressive than state income tax codes. So the total paid by all income brackets by the state is much closer. So the relative burden to lower incomes is higher for state taxes. This explains some of the reason why higher income earners have seen the biggest decline in overall tax burden. For half a dozen states the income tax rate rose fast enough to outpace the reductions in federal tax rate.
This is all interesting but in the end what really matters is what your business and family have to pay in taxes. That is something that we can help you out with. As you prepare to do your 2012 income taxes then give us a call.
Labels: income tax rates
