Taxes

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There is an old saying that nothing is certain in life besides death and taxes. I will be dealing with death in my new both “Getting Old Really Sucks,” so I will deal with taxes in this article.

What type of taxation does the US have?

The overall system of taxation in the United States is progressive. By a progressive tax system, we mean that the percentage of income an individual (or household) pays in taxes tends to increase with increasing income. Not only do those with higher incomes pay more in total taxes, they pay a higher rate of taxes.

There has been many arguments that our system of taxation is too complicated. I am firmly in this camp. Tax money shold serve a purpose. You know you have a defunct system when it costs billions of dollars to just collect the taxes. There are so many lloopholes in our tax system that a multi-billion industry has arose just to help people reduce their tax burden. The Federal government is planning on hiring 80,000 new IRS agents to help collect taxes. That is insane !

If a very intelligent man like Albert Einstein found income tax to be complicated you know that we are in trouble. “The hardest thing in the world to understand is income tax!”–Albert Einstein

The federal income tax rates remain unchanged for the 2022 tax year are 10%, 12%, 22%, 24%, 32%, 35% and 37%. The income thresholds for each bracket, though, are adjusted slightly every year for inflation. Read on for more about the federal income tax brackets for Tax Year 2022 (filed by April 17, 2023). You can also work with a financial advisor who specializes in taxes to craft a financial plan that helps you to make sure you don’t overpay on your taxes.

The Federal Income Tax Brackets

The U.S. currently has seven federal income tax brackets, with rates of 10%, 12%, 22%, 24%, 32%, 35% and 37%. If you’re one of the lucky few to earn enough to fall into the 37% bracket, that doesn’t mean that the entirety of your taxable income will be subject to a 37% tax. Instead, 37% is your top marginal tax rate. You should note, however, that President Joe Biden has proposed raising the top bracket up to 39.6%.

How the Marginal Tax Rate Works

With a marginal tax rate, you pay that rate only on the amount of your income that falls into a certain range. To understand how marginal rates work, consider the bottom tax rate of 10%. For single filers, all income between $0 and $10,275 is subject to a 10% tax rate. If you have $10,475 in taxable income, the first $10,275 is subject to the 10% rate and the remaining $200 is subject to the tax rate of the next bracket (12%).

Check out the chart below to see what your top marginal tax rate is for the tax year 2022, which will be filed in 2023.

FEDERAL INCOME TAX BRACKET FOR 2022 (FILING DEADLINE: APRIL 17, 2023)
	Single	Married Filing Jointly	Married Filing Separately	Head of Household
10%	$0 – $10,275	$0 – $20,550	$0 – $10,275	$0 – $14,650
12%	$10,276 – $41,775	$20,551 – $83,550	$10,276 – $41,775	$14,651 – $55,900
22%	$41,776 – $89,075	$83,551 – $178,150	$41,776 – $89,075	$55,901 – $89,050
24%	$89,076 – $170,050	$178,151 – $340,100	$89,076 – $170,050	$89,051 – $170,050
32%	$170,051 – $215,950	$340,101 – $431,900	$170,051 – $215,950	$170,051 – $215,950
35%	$215,951 – $539,900	$431,901 – $647,850	$215,951 – $323,925	$215,951 – $539,900
37%	$539,901+	$647,851+	$323,926+	$539,901+

Now, here is the chart for tax brackets for the 2023 tax year, to be filed in 2024.

FEDERAL INCOME TAX BRACKET FOR 2023 (FILING DEADLINE: APRIL 15, 2024)
	Single	Married Filing Jointly	Married Filing Separately	Head of Household
10%	$0 – $11,000	$0 – $22,000	$0 – $11,000	$0 – $15,700
12%	$11,001 – $44,725	$22,001 – $89,450	$11,001 – $44,725	$15,701 – $59,850
22%	$44,726 – $95,375	$89,451 – $190,750	$44,726 – $95,375	$59,851 – $95,350
24%	$95,376 – $182,100	$190,751 – $364,200	$95,376 – $182,100	$95,351 – $182,100
32%	$182,101 – $231,250	$364,201 – $462,500	$182,101 – $231,250	$182,101 – $231,250
35%	$231,251 – $578,125	$462,501 – $693,750	$231,251 – $346,875	$231,251 – $578,100
37%	$578,126+	$693,751+	$346,876+	$578,101+

In rare cases, such as when one spouse is subject to tax refund garnishing because of unpaid debts to the state or federal government, opting for the “Married filing separately” tax status can be advantageous. Typically, though, filing jointly provides a tax break.

Only single people should use the single filing status. Single taxpayers who have dependents, though, should file as “Head of Household.” To qualify for this filing status, you must pay more than half of household expenses, be unmarried and have a qualifying child or dependent.

How Federal Tax Brackets Work

In the U.S., income is taxed progressively with higher tax brackets than in most other nations. Not all income is treated equally, as the more you make the higher percentage you end up contributing in taxes. All brackets work on a taxable income basis, not necessarily the actual amount of money earned in a given year.

Once all deductions are accounted for, and tax credits awarded, then the income total that is leftover is your taxable income. That income falls into a tax bracket and you pay the percentage within that bracket.

The easiest thing to do is to use SmartAsset’s free income tax calculator, but here are some tips to keep in mind if you’re estimating your own taxes:

Actual taxes paid: The tax you owe could vary based on where your income comes from and how it is broken up. Your entire income won’t necessarily be taxed at your tax bracket rate.
Income thresholds: The income thresholds for the federal tax brackets are updated and could change, annually. This is done to account for inflation.
Effective tax rate: Your effective tax rate is the percentage of your taxable income that you’ll pay in taxes. You can calculate this by dividing your tax owed by your total income. This is what you’ll actually pay.

If someone asks you for your tax bracket, the person is almost certainly asking for your top marginal tax rate. That’s why, when you’re reading the news, you’ll hear references to “filers in the top bracket” or maybe “taxpayers in the 37% bracket.” America’s top federal income tax bracket is varying over time quite a bit. It’s hard to believe now, but top federal income tax rates were once as high as 92%.

Understanding the Current Federal Income Tax Brackets

Our current tax brackets were adjusted when Congress passed new legislation in 2017 that changed the brackets and how taxes are filed. The tax reform passed by President Trump and Congressional Republicans lowered the top rate for five of the seven brackets. It also increased the standard deduction to nearly twice its 2017 amount.

For the most recent taxes filed, for the 2021 tax year that was filed in 2022, the standard deduction was $12,550 for single filers and married filers who file separately. Joint filers will have a $25,100 deduction and heads of household get $18,800.

The Bottom Line

Tax filers will need the 2022 federal income tax brackets when they file taxes in 2023. Your top tax bracket doesn’t just depend on your salary. It also depends on other sources of income (such as interest and capital gains) and your deductions. Depending on where you fall within a tax bracket, deductions could knock you into a lower tax bracket, reducing your tax liability or increasing the size of your tax refund.

Tips for Tax Filing

If you’re precise with numbers and good at record-keeping, you’re probably fine using tax preparation software. But if you want help minimizing your tax liability, you can consider hiring a financial advisor who specializes in taxes. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
If you need more time to file your taxes, you can use Form 4868 to get a maximum extension of six months from the April 15 deadline (to October 15.) But remember, this extension does not apply to payments. So if you owe taxes, you should estimate what you owe and pay what you can to avoid a penalty and interest.

There has been a push to abolish theFederal Income tax. With savings and investments no longer taxed, Americans willenjoy a capital formation boom. There will be increased productivity,higher paying jobs, and new investment from around the world attracted bya policy of no income taxes. American exports will surge because our prices will be downsharply.

My Plan to End the Income Tax

By Senator Richard Lugar

My vision for America is of a typical American family thatactually enjoys better job prospects and more real income. The paychecksare bigger, savings are greater, and hopes for the future abound.

I strongly favor adopting a federal budget plan that offers aclear and reasonable path to balancing the federal budget in the nextseveral years. The younger members of our families will havediminished hopes each year if we continually pile up more nationaldebt and obligate more and more of our annual national budget tosimply paying interest on an ever‐increasing mountain of debt.

Equally important, I favor abolishing the federal income taxand all of the Internal Revenue Service apparatus that has grown tocollect and enforce the income tax. Specifically, I propose toabolish immediately and completely the federal individual and corporatetax, capital gains taxes, gift taxes, and inheritance taxes allat the same time. And with them all of the tax loopholes thathave been created for special interests.

I would replace the money obtained from those taxes with moneyfrom a national retail sales tax collected in the same way thatstate sales taxes are now collected in 45 states. I propose thatthe states be responsible for collection so that the federal IRSapparatus can be dismantled promptly.

That means, for every American, that the money you earn isyours. You may save it or you may spend it, but the paycheck is biggerwithout the automatic income withholding deduction. You need not accountfor it, report it, or hide it. If you spend it, you will pay anational retail sales tax.

You regain your privacy. You are no longer guilty until youprove your innocence to the IRS. You regain the freedom of your timeand labor. More than 5 billion hours are now spent by American individualsand businesses trying to comply with the federal income taxrequirements each year. That is close to all the work for oneyear by all people in all jobs in the state of Indiana.

You stop worrying about whether the family farm or store willhave to be sold to pay estate taxes because there won’t be gift orestate taxes anymore.

This will not be a tax increase. Various economists estimatethat to raise the same funds that now come from the income tax, a 17percent retail sales tax is required. And it is important to notethat without the income tax, prices for almost all products willgo down before the sales tax is applied.

With savings and investments no longer taxed, Americans willenjoy a capital formation boom. There will be increased productivity,higher paying jobs, and new investment from around the world attracted bya policy of no income taxes.

American exports will surge because our prices will be downsharply. An American car or bulldozer will be priced without federaltaxes built into the price. We will be much more stronglycompetitive abroad and create hundreds of thousands of new productionjobs.

On the other hand, a foreign product sold in the United Statesat retail will be taxed at the national and state sales tax leveljust like an American product.

As president, I will work with and support the efforts ofmembers of the House and Senate to produce legislation implementinga national retail sales tax. Many have already indicated theirsupport and have spoken out.

The legislation must recognize the necessity that a certainnumber of dollars of purchases per person be tax‐free each year, andthat certain categories of purchases such as food and medicine beexempt from the sales tax. The problems of low‐income citizensmust be met simply and clearly.

As much as $100 billion to $150 billion in income taxes is notcollected each year. The retail sales tax can be much more efficient.Collection problems must be met in the legislation and properincentives offered to those involved in collection at the grassroots.

The bottom line is new liberty for Americans and dynamic newgrowth in our job and income prospects.

Our current economic framework simply does not offer that hopefor the future to average Americans. Currently, the Federal ReserveBoard is striving to hold real economic growth down to 2.5percent annually by raising short‐ term interest rates. Thatgrowth rate is simply too small to meet the hopes and dreams ofmost Americans. It is too small to meet our competition abroad.In due course, the interest rate hikes will lead to declininggrowth and higher unemployment long before middle‐Americans havea feeling of confidence about the future.

The federal income tax system taxes savings, investments, andhopes for the future. It is too complex, too intrusive, and it pricesour exports too high.

Presidential campaigns offer an opportunity for the Americanpeople to make a change in course. Candidates must offer strongand bold programs that give the people solid choices for thebetter. I advocate the total end of federal income taxes. I advocatea national retail sales tax as the best alternative to obtain thefunds to run the government in a direct and easily observedmanner subject to constant scrutiny by the people and theirelected representatives.

There is one more argument against taxes and that is income tax unconstitutional? The Sixteenth Amendment provides that Congress shall have the power to lay and collect taxes on income, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration. The Sixteenth Amendment was ratified by forty states, including Ohio (which became a state in 1803); see Bowman v. United States, 920 F. Supp. 623 n.1 (E.D. Pa. 1995) (discussing the 1953 joint Congressional resolution that confirmed Ohio’s status as a state retroactive to 1803), and issued by proclamation in 1913. Shortly thereafter, two other states also ratified the Amendment. Under Article V of the Constitution, only three-fourths of the states are needed to ratify an Amendment. There were enough states ratifying the Sixteenth Amendment even without Ohio to complete the number needed for ratification. After the Sixteenth Amendment was ratified, the Supreme Court upheld the constitutionality of the income tax laws. Brushaber v. Union Pacific R.R., 240 U.S. 1 (1916). Since then, courts have consistently upheld the constitutionality of the federal income tax.

Resources

bu.edu, ” Taxes in the United States: History, Fairness, and Current Political Issues.” By Brian Roach; irs.gov, ” Taxation of U.S. Residents.”;smartasset.com, “Federal Income Tax Brackets for Tax Years 2022 and 2023.” By Amelia Josephson; cato.org, “My Plan to End the Income Tax.” By Senator Richard Lugar;

Common Sense and Ramblings In America

Taxes

The Federal Income Tax Brackets

How the Marginal Tax Rate Works

How Federal Tax Brackets Work

Understanding the Current Federal Income Tax Brackets

The Bottom Line

Tips for Tax Filing

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The Federal Income Tax Brackets

How the Marginal Tax Rate Works

How Federal Tax Brackets Work

Understanding the Current Federal Income Tax Brackets

The Bottom Line

Tips for Tax Filing

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