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The most significant event in American history in July is undoubtedly the July 4th Declaration of Independence. However, for the American worker, a very controversial but necessary change took place on July 1, 1943; payroll deductions by the IRS began for most employees.
It is important to understand why payroll deductions were and are necessary and condemn the government for placing the responsibility for taxation primarily on the working class and ignoring the super-rich and enormously profitable corporations which control our nation in the 21st century.
First, as most people know, the federal income tax rate is calculated using deductions claimed and paid for by the employee. However, since 1943, other taxes have been added: Social Security, 12.4%; Medicare, 2.9%; and payroll tax, 7.65%. In addition, the employer pays another 7.65% payroll tax.
I’m sure you believe these taxes are a lot of money every payday. You are right, but although there are no payroll taxes in the United Kingdom, a standard VAT rate of 20% applies to most goods and services, apart from domestic fuel and power, which are subject to a VAT rate of 5%.
In France, the rate is adjustable. Rates are progressive from 0% to 45%, plus a surtax of 3% on the portion of income that exceeds 250,000 euros (EUR) for a single person and EUR 500,000 for a married couple, and 4% for income that exceeds EUR 500,000 for a single person and EUR 1 million for a married couple.
You can see that the American worker pays fewer taxes than other developed nations. Also, consider this fact: Most Americans earn less than those other nations, and in 2021, about 57% of all Americans paid zero dollars in federal income tax. Every dollar deducted from their paychecks was returned.
Income inequality is a real danger to our nation’s economic future. If consumerism declines, capitalism will follow.
The super-rich’s income is a maximum federal tax rate of 37% and 23.8% on capital gains. A government estimate claims that the treasury receives an amount in the 20 percent range after deductions. President Joe Biden’s administration believes that between 2010 and 2018, the wealthiest 400 families in America paid just 8.2%.
In 2018, Trump reduced the corporate tax rate without eliminating deductions. As a result, in 2021, Amazon reported net earnings of $35.1 billion. The giant paid just 6.1% in federal taxes. Exxon Mobile Corp. reported an income of $9.3 billion with a taxable percentage of just 2.8%. AT&T Inc. reported revenue of $29.6 billion and received a tax credit of 4.1%. Microsoft Corp. declared profits of $33.7 billion, and its tax rate was 9.7%.
America’s national debt is about $30 trillion.
During the post-war era of the 1950s, when America’s economy was soaring, the maximum tax rate was 91%, although no one paid more than 70%. In 1981 Ronald Reagan adopted an economic policy called “supply-side economics,” better known as “trickle-down economics.” As a result, tax rates for the wealthiest Americans were reduced from 70% to 50%. The highest corporate tax rate was 46.2 percent.
After four presidents who used the policy of “trickle-down economics,” the max tax rate in 2021 was 37%. The corporate tax rate was 21%.
These are the principal reasons for the increase in the national debt.
President Biden is proposing a “wealth tax.” As you might imagine, the one percent of wealthiest Americans are upset.
Taxation has always been a topic of discussion. However, taxes are necessary, and common sense tells us that those who benefit most from doing business in America should pay their fair share. However, after Trump’s tax cuts in 2018, Amazon and Walmart paid zero dollars in taxes in 2019.
Multiple changes have been proposed, including a flat and a national sales tax, but the wealthy objected. Americans do not have a valid complaint about taxes but have reason to demand fair taxation.
By James Turnage
Edited by Sheena Robertson
Bankrate: 2021-2022 tax brackets and federal income tax rates
Cap: These 19 Fortune 100 Companies Paid Next to Nothing—or Nothing at All—in Taxes in 2021
ADP: Payroll taxes: What they are and how they work