As the presidential election heats up, you’ll hear crazy men and women shouting about lots of hot-button social issues. (We pretty much guarantee it.) You’ll also hear some less entertaining talk about taxes. It’s not as sexy, but it’s definitely important.
Without further ado, then, here are the most important tax issues you should be aware of this time around. No bias, we promise – just the facts.
Issue #1: Income Tax vs. Fair Tax
The “Fair Tax” is a national sales tax that would replace your income taxes. That’s right – you’d just pay a little of your taxes with every item you bought, and then there would be no need for “tax time.” In theory, the ”Fair Tax” would require both the poor and the rich to pay the same amount of sales tax on their purchases, which would obviously increase the tax burden on the poor. You can read more about the Fair Tax here.
Issue #2: The “Flat” Tax
The flat tax means that all Americans would owe the same percentage of their income at tax time, once they’ve paid an established amount known as a deductible. In plain English: Everyone – rich and poor – would have to pay 15 percent of their total income (or 25 percent, or whatever), no matter how much they made. Of course, this would make the tax code much simpler! But it would also mean that taxpayers would lose personal deductions (mortgage interest, healthcare, etc.) And it would also mean that the rich would not have to pay a higher percentage than the poor – a problem for those of us who like our current progressive-rate system.
Issue #3: Tax subsidies used for agriculture
This issue is about corn and wheat, but it’s also about “pork.” Right now, public tax dollars are used to help subsidize the agriculture industry, but some small-government candidates argue that this is wasted government spending (that’s where the pork comes in). Other candidates believe that farmers need the stability of a guaranteed paycheck for their crop. Of course, there’s always the problem of people PRETENDING to be farmers in order to get subsidies.
Issue #4: FICA Tax Rates
FICA is the 15.3 percent of your income that pays for Social Security and Medicare. If you’re employed, you pay half of this tax and your employer pays the other half – but self-employed people have to pay the entire 15.3 percent (the dreaded, crushing “self-employment” tax). This is one issue.
The other issue is the unfair split between Medicare and Social Security. The Medicare portion of FICA is a 2.9 percent tax on your entire income, and that goes for everyone. But the Social Security tax is a 7.65 percent tax (or, for self-employed people, 15.3 percent tax) on ONLY the first $120,000 or so of your income. If you make $120,000 or less, this is quite a sizeable chunk of your salary. But if you make $120 million, you pay exactly the same amount as a less wealthy person: 7.65 percent of your first $120,000.
Is your head spinning yet? The point is that there’s an unfair distinction between the rich and the poor when it comes to paying for Social Security and Medicare. The poor have to pay a much larger percentage of their income than the rich do. Will that issue get fixed in the 2015 election? We’ll see.
Issue #5: Estate or “Death” Tax
How much should it cost you to die? When you pass away, your estate is subject to a tax that is designed to collect extra money from rich people, who often don’t have to pay taxes on much of their income during their lifetime. Unfortunately, this tax often hits small business owners and farmers especially hard, since the value of their assets exceeds the “no tax” limit. This is an ongoing discussion in presidential elections – even if it is a little ghoulish.
How do these tax issues affect you? And what do you think we should do about them?
If you have any questions about your hot-button tax issues, give us a call at 844-841-9857, or schedule a free consultation here.
A recent article from the Washington Post cites data from 2019, where 1.3% of taxpayers earning one million to five million dollars were audited. Further, only 0.2% of those earning $25,000 to $50,000 were audited. You must understand this is not a personal attack when you receive an audit letter. The IRS has a computer...
In June 2023, the IRS began sending millions of CP14 notices to taxpayers countrywide. Those who receive these statements typically have many questions about what they mean and how to handle them. The Polston Tax Resolution & Accounting professionals are here with the answers you need. What Is an IRS CP14 Notice? An IRS CP14...
In 2022, Americans owe a whopping $120 billion in back taxes, according to the IRS. Now some people owe a year’s worth of taxes and can quickly get back on track. At the same time, others owe years and years’ worth of taxes and face severe consequences for their unpaid taxes. Have you been worried...
Receiving a letter from the IRS or the state can be intimidating, especially if you’re unsure what the notice is for or what to do next. Fortunately, many notices are nothing to worry about and are purely informative. Below, we take a look at everything you need to do — and what not to do...
The Employee Retention Tax Credit (ERC or ERTC) is a tax credit that the United States government introduced as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The ERC was meant to help businesses across the country that were feeling the negative impacts of the COVID-19 pandemic. Eligible companies are still able...