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The primary focus on the newly proposed tax fairness proposal is that the middle class should not be penalized by way of the wealthy benefitting from lower tax brackets. In other words, just like progressive tax systems amount to a somewhat higher tax bracket for higher income earnings for Americans earning below $1 million annually – the same should apply for wealthy individuals. The Buffett Rule encompasses the simple principle that any household with annual earnings of $1 million or more should not pay a smaller share of their income taxes than as compared to middle class family earners. In short: everyone should pay his or her fair share of income taxes.
As reported on the official White House website, approximately 55,000 millionaires are paying a lower tax rate than millions of Americans with average middle class incomes. In fact, the tax bracket of about 18% has hovered for the last fifty plus years with no change whatsoever in the income tax required by average earners in the nation. Conversely, wealthy individuals have seen a steady decline on the amount owed on income taxes, with a starting average percentage of about 50% in 1960 to about 25% in the present day. The numbers are even more staggeringly low for mega-millionaires.
Present-Day Tax System
As reported by the IRS, there were 22,000 taxpayer households that earned at least a million dollars in the 2009 tax year, all of whom paid below 15% of their income in federal taxes. What’s more, nearly 1,500 of these people enjoyed having no income taxes at all on those incomes. Recently the number two person on Forbes’ list of wealthiest persons, Warren Buffett, realized that his was a lower tax bracket than that of his secretary! This is the current tax system but according to President Obama it must be changed to reflect a more balanced and fair tax system.
Little change has occurred over the past 50 years for middle class earners, with an average increase in 2010 to 16% versus the 14% average income tax paid by the same in 1960. The insignificant change in wealthier Americans’ income tax has sparked growing awareness of the possibilities should there be more balance and fairness across the board.
Proposed Changes to Current System With Buffett Rule
The single biggest change that is proposed with the Buffett Rule is that anyone earning more than $1 million in a given tax year should not be allowed to pay a smaller share of their income – especially as compared to middle-class households. Furthermore, taxes should not be increased at all for the 98% of American households that earn under $250,000 per year.
By limiting how much the wealthy and extremely wealthy are able to tap into tax loopholes that make it easy for them to pay far less in income tax than their middle-class counterparts, the Buffett Rule would engage all earners to pay according to their earnings level. The benefits of this new system would immediately be felt throughout the country, reverberating positivity in the economy and the chance for a return to strong economic growth. The money saved by tax breaks currently received by the county’s most well-off households would serve to improve education, health care systems, defense departments, social security administration and more. Not only that, Americans could expect to see a reduction in our national deficit rather than increasing debt.
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There is much controversy on the Buffett Rule. What do you think? Do you feel that Americans earning more should continue to be allowed tax breaks on that income? Or do you feel that it depends on whether or not earnings are used for basic survival versus personal gains? I invite you to weigh in on this topic with your comments below.
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