Income Tax on Wages

In 1913,  the 16th Amendment was passed, giving the government the right to collect income tax in order to begin paying service fees to the Federal Reserve, which had just taken control of creating U.S. currency from the U.S. Treasury.  According to some, the 16th Amendment was directed only at capital gains income and was never intended to tax wages or salaries, which at the time were considered an equal exchange of goods/services akin to bartering and were not considered “profit” income.

Because an income tax makes it necessary for citizens to disclose all their financial records, it be may considered an invasion of privacy.  The income tax on wages could be replaced by less intrusive and less costly alternative forms of taxation, such as excise tax, tariffs and fiat currency, which were the government’s main means of collecting taxes before 1913.

Currently, about half the population pays almost no income tax because they earn so little. In 2017, the top 10% of tax payers paid 90% of the total revenue collected from individual Federal income tax (mostly on capital gains, not wage income).  See Pew Research. Considering how much money, time and effort the bottom 90% have to put into filing income tax returns and paying their income taxes, it hardly seems worth it to collect just 10% of revenue.  A 50K standard deduction per individual would bring much needed relief to middle-income earners.

Abolishing the income tax on wages for the bottom 90% of the population would save much of the approximately $11.5 billion used to run the IRS each year and would end up making little difference overall in the government’s balance sheet–and would significantly improve the balance sheet of most US citizens.

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6 Comments Add yours

  1. Anonymous says:

    Around 15% of Americans last year were under the poverty line. Americans are subjected to some of the highest income tax in the world, which is clearly reflected in the poverty of their neighborhoods. Leaky roofs cover a family eating plain beans and rice. For the middle class, paying 30 percent of their around 30-40k can be tough. In countries like Switzerland, most pay around 25-30 percent, but their quality of life is much higher. Perhaps if those American taxes were directed properly those aforementioned poor neighborhoods wouldn’t be in such a state. If we can’t control how the government spends our taxes, maybe we can control how we pay?

    In America the top 10 percent pay 68 percent of all taxes; the top 10 percent make around $130,000/year. If instead we used a progressive tax for those at and above $250,000/year, while not taxing anyone below that at all, we could fund all the government’s shenanigans and limit the über wealthy.

    Income tax could also be removed and replaced with Tariffs and the modification of Capital Gains Tax and Corporate Tax. In the movie _Armageddon_, the characters ask to be repaid for risking their life on a mission to save the world by not ever having to pay taxes again; ending this tax is something most people would agree with, especially Republicans. But there’s a catch for them: what you would replace income tax with also helps regulate corporations and the superwealthy.

    If you purchase a property, make renovations to the house or otherwise improve it, then sell it for more than you purchased it for, you are subject to Capital Gains tax. However, if a corporation does this exact same thing, they don’t have to pay anything! Flipping this arrangement would help the working man and help regulate corporations. Corporations are mostly exempt from taxes on improvements and some types of mergers, acquisitions, and liquidations. Taxing these actions as well as raising the tax that is already imposed would continue to limit corporations.

    By shifting income tax to a progressive tax of 250k+ or switching to expanded versions of already imposed taxes, you could greatly increase the quality of life and regulate corporations and the super wealthy to make sure they don’t get too much power.

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