Latest news with #progressive tax
National Post
27-07-2025
- Business
- National Post
J.D. Tuccille: Lower taxes are the best thing about the one, big, beautiful bill
Article content By contrast, the bottom 50 percent of earners paid 3 percent of federal income taxes on 11.5 percent of AGI. The U.S. tax system is very progressive; the more you make, the bigger the mugging by government. Article content In 2023, Pew Research crunched the numbers and found that 'all groups of taxpayers with $1 million or more in adjusted gross income (AGI) had average effective tax rates of more than 25 per cent.' On the other hand, 'tens of millions of Americans owed little or no federal income tax' because of low income and refundable tax credits. For those earning less than $30,000, the average effective tax rate was 1.5 per cent before taking tax credits into account. Because of those credits, millions of people actually get money from the government after filing taxes, effectively giving them a negative tax rate (-3.33 per cent for those earning $25,000 to $30,000, after credits are considered). Article content In fact, continues Pew, 'since 2000, there has been a downward trend in average effective tax rates for all but the richest taxpayers.' Article content As for those paying the lowest possible rates, adds the Tax Policy Center, in 2025 '40 per cent of households, or about 76 million 'tax units,' will pay no federal individual income tax.' About 70 per cent of those paying no income tax earn less than $75,000, and 45 per cent earn less than $40,000. The ranks of those paying no taxes were expected to shrink to 33.5 per cent by 2035 if the TCJA was not extended. Article content That doesn't mean that 40 per cent of the country is paying no taxes at all. Most still get forced to pay in to the federal Social Security and Medicare schemes just like everybody else, even if they prefer to make their own plans. And many states and some localities impose their own income taxes along with sales taxes. Of course, we all have to pay the tariffs on imports imposed by the federal government. Article content The U.S. isn't alone in the progressivity of its tax system. According to the Fraser Institute, in Canada, 'the top 20 per cent of income-earning families pay nearly two-thirds (64.5 per cent) of the country's personal income taxes and more than half (56.9 per cent) of total taxes' while earning 47.8 per cent of total income. Meanwhile, 'the bottom 20 per cent of income-earning families are estimated to pay 0.7 per cent of all federal and provincial personal income taxes and 1.9 per cent of total taxes in Canada' while earning 4.8 per cent of total income. For the top 20 per cent of Canadian earners, the average personal income tax rate is 22.8 per cent; for the bottom 20 per cent it's 2.4 per cent. (Canada's taxes, overall, are higher than those in the U.S. Its income tax burden is the fifth highest among nations in the OECD while the U.S. is 23rd.) Article content Article content That doesn't stop people in both countries from complaining that the wealthy aren't paying their 'fair share.' But it does raise the question of just what 'fair share' is supposed to mean when 40 per cent of income taxes are paid by the top 1 per cent of earners and 61 per cent are paid by the top 5 per cent — both numbers much larger than the proportion of total income that's being taxed. It's rather obvious that 'fair' is just an expression of envy and a euphemism for 'take it all to make me feel better.' Article content But envy isn't something that should be indulged in a free society. And, if we can find a way to lower taxes for everybody, that's a great way to encourage people to work for their own benefit. Article content Again, there's plenty to object to in the OBBB. The fact that, like so much legislation these days, it was turned into a grab bag of unrelated items with an up-or-down vote on the whole mess required is just the beginning. Projections that it will send the deficit and debt soaring also raise concerns. Article content
Yahoo
24-07-2025
- Business
- Yahoo
I Asked ChatGPT What Would Happen If the Upper Class Paid Taxes at the Same Rate as the Lower Class — Here's What it Said
America's progressive tax system is based on graduated brackets that require higher earners to pay a larger percentage of their income than lower earners — at least on paper. I asked ChatGPT what would happen if the upper class paid taxes at the same rate as the lower class, and it explained that the rich would pay more, not less, if the law were changed to even the rates. In fact, it wrote that 'the U.S. economy and society would experience major shifts.' Here's what it told me. Find Out: Read Next: The Effective Rate Looks Nothing Like the Progressive Brackets ChatGPT explained that, thanks to loopholes and deductions, the effective tax rate — what people actually pay — looks more like the following table than the familiar IRS brackets that levy a 10% income tax on the lowest earners and 37% on the highest. Income Group Average Effective Tax Rate Bottom 20% (low income) 10% to 14% Middle 20% 15% to 18% Top 1% 25% to 27% Top 0.01% 23% or lower due to loopholes and capital gains ChatGPT summed it up with this: 'Despite progressive tax brackets, effective tax rates (what people actually pay after deductions) show that the wealthiest often pay less than their tax bracket — especially if their income comes from investments taxed at lower rates (e.g., capital gains, dividends, carried interest).' Discover More: What Would Change If Everyone Paid the Same Rate? The AI platform created a hypothetical scenario where all Americans paid the same effective rate of 20%. It came up with four dramatic changes that could result. The following is a verbatim recounting of its synopsis. 1. Massive Revenue Increase The ultra-wealthy would pay dramatically more. The top 1% currently hold over 20% of total income and over 40% of wealth. Equalizing their rates with lower earners could generate $500 billion to $1 trillion per year in added federal revenue. This alone could fully fund universal pre-K, child care and perhaps even universal health coverage — without raising anyone else's taxes. 2. Reduced Deficit and Debt The U.S. deficit would shrink significantly. Interest on debt could fall over time, freeing up more government funds for infrastructure, education or emergency reserves. 3. Simpler, Fairer Tax Code With fewer loopholes and income-type preferences (like lower capital gains rates), the tax code would become simpler and more equitable. 4. Behavioral and Economic Reactions Wealthy individuals and corporations might: Shift income offshore, increase tax avoidance Reduce investment (if capital gains are taxed higher) Lobby aggressively to reinstate preferential treatment It's Much Better To Be Rich Today Than 50 Years Ago The platform then provided historical context that puts today's tax framework in perspective with this verbatim response. In the 1950s-'60s, the top marginal tax rate in the U.S. was over 90%, and the economy grew rapidly. Today, the top 1% pay a smaller share of their wealth and income than they did 40 to 50 years ago. So the real impact is less about 'raising the rich to poor's rate' and more about closing loopholes that let the rich pay less than their tax bracket. Summary ChatGPT closed by summarizing its report with the following word-for-word synopsis. If the rich paid the same effective rate as the poor: Massive new federal revenue Potential for big public investments or deficit reduction Greater tax fairness Possible economic tradeoffs from investment shifts or tax planning More From GOBankingRates 7 Tax Loopholes the Rich Use To Pay Less and Build More Wealth This article originally appeared on I Asked ChatGPT What Would Happen If the Upper Class Paid Taxes at the Same Rate as the Lower Class — Here's What it Said Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
