The current Tax code in the United States is quite complex that even some experts cannot figure it out. Both taxpayers and policymakers share a routine frustration of the tax systems vintage rules, along with its never ending loopholes which seem to contradict fairness and logic. Americans are sick with the current system, and many are looking for answers to this growing problem. Americans want this overly complicated system to be not only simplified, but also standardized in the way taxes are computed. Sanjay Sanghoee, a buisness commenter at fortune.com believes he has the answer. He believes to achieve this standardized system in the United States must replace the current progressive tax scale with a flat 20% tax rate for individuals who
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However, this is only in theory. In reality, the wealthy pay closer to 22% due to various reasons. Many of america's wealthy have a predominance of investment income taxed at a flat rate of 20%. Wealthy Americans may enjoy tax breaks from mortgage interest payments. Others may donate large amounts to charities. Above all, many wealthy americans are able to deduct state and local taxes from their federal taxable income. Most individuals enjoy an annual income enjoy an effective tax rate of only 23%.
Looking what the wealthy really pay in taxes, proposing a 20% flat rate isn’t that insane. Sanjay believes even though “a lower tax rate might reduce receipts from some payers, it would also put more money in the pockets of millions of consumers, which could boost the economy and raise tax revenues as a byproduct.” Given that 70% of the U.S. economy is dependent on consumption, a lower tax rate could provide a meaningful boost to gross domestic product.
Major corporations pay substantially lower taxes simply by “moving earnings offshore through a variety of loopholes, such as tax deductions for employer health insurance payments, accelerated depreciation of equipment, 401k contributions, as well as industry-specific tax
However, this is only in theory. In reality, the wealthy pay closer to 22% due to various reasons. Many of america's wealthy have a predominance of investment income taxed at a flat rate of 20%. Wealthy Americans may enjoy tax breaks from mortgage interest payments. Others may donate large amounts to charities. Above all, many wealthy americans are able to deduct state and local taxes from their federal taxable income. Most individuals enjoy an annual income enjoy an effective tax rate of only 23%.
Looking what the wealthy really pay in taxes, proposing a 20% flat rate isn’t that insane. Sanjay believes even though “a lower tax rate might reduce receipts from some payers, it would also put more money in the pockets of millions of consumers, which could boost the economy and raise tax revenues as a byproduct.” Given that 70% of the U.S. economy is dependent on consumption, a lower tax rate could provide a meaningful boost to gross domestic product.
Major corporations pay substantially lower taxes simply by “moving earnings offshore through a variety of loopholes, such as tax deductions for employer health insurance payments, accelerated depreciation of equipment, 401k contributions, as well as industry-specific tax