Overview
Everybody thinks rich people should pay more taxes. Everybody's definition of "rich" seems to start at a level just above wherever they happen to be on the economic ladder, right?
Income taxes are complicated, but here's a quick lesson if you haven't faced this yet. You have a choice:
1. You can take the "standard deduction," which is available to everybody. It's an amount you get to subtract from your taxable income before you figure out how much tax you owe. The amount is the same for everybody that files a particular way - If you're single with no kids, you generally get to subtract $12,950 from the amount of your income on which you're taxed. This is one of the ways we help lower income people. Think about it - if you only make $25,000 a year, you're only paying tax on about half your income. If you make $100,000 a year, you're paying tax on about 7/8 of your income, right? Or...
2. You can file a "Schedule A" and itemize your deductions - adding up the value of everything you did that was tax-deductible last year. If the total is more than what you would get with your standard deduction, that's the smart move.
Until a few years ago, lots of Americans - including nearly all homeowners - filed a Schedule A to itemize their deductions, complicating tax returns and creating a tremendous business for accountants to determine what was and wasn't deductible. Then, in 2017, a major tax reform law changed the game, increasing the "standard deduction" to the point where many middle-income homeowners no longer need to itemize - simplifying the income tax filing process for a lot of people.
But is the standard deduction high enough? Because home mortgage interest and home property taxes are deductible with almost no limit, wealthy Americans with multi-million dollar homes can realize a pretty huge tax break that's not really available to the rest of us. Ok, it's available, but the standard deduction works out better than what we would get if we itemized.
Last May, Congresswoman Michelle Steel (R-CA) and Congressman Salud Carbajal (D-CA) introduced H.R. 3270, the Permanent Tax Cuts for American Families Act of 2023. The bill would add an extra $4,000 to the standard deduction for a married couple filing federal taxes jointly - $2,000 more for single filers. People with incomes in the top 1% or below about $19,500 would not qualify. (Americans making less than $15,000 generally don't pay any federal income tax) The bill will probably not be considered by itself, but the provisions may be added to a larger tax bill at some point this year.
Who seems to have been for and against it?
What do you think about it? If you were a Congressman or Senator, how would you vote and why?