Tag: Progressive Tax

Tax Law is created by Congress, not by the IRS

Just sitting here and reading some social media posts makes me laugh when I read about, “Oh you should go after the IRS…  It is the IRS’ fault… IRS this… IRS that…”

Stop just a few minutes here and think about it.   Who creates tax laws?  Who then votes certain bills to make such a tax become a law?   IT is Congress itself.  Not the IRS. The IRS has to “enforce” the tax laws passed by such Congress in order to collect the taxes THAT CONGRESS created and voted for and therefore passed to become a law – that then affects the local US Citizens.

It is very similar in comparison to judges and even supreme court justices… local, state and federal officials create(s) and pass(es) laws… Then it is up to the people in law enforcement (local police, Sheriffs, lawyers, judges, supreme court judges, etc.) to interpret and apply such law to each individual case.

Oh, but of course – the regular citizen, regular folks don’t even seem to bother to understand the above. And just attack the people who are trying to enforce the laws (again I say) created by and passed by “elected officials”.

Here is where I want to visually show everyone what our current Federal Income Tax System looks like when we pay our file and pay our taxes every April 15th (each year). Courtesy of Nerdwallet.

2021-2022 Tax Brackets and Federal Income Tax Rates:

I want to refer back to my previous blog simply explaining the “Laffer Curve”. This blog was posted back on January 11, 2021.

Tax Rates – The Laffer Curve

Our current Federal Tax system is a progressive tax system just by looking at the tax rates above from Nerd Wallet. They basically took it directly from the IRS website and obviously is confirmed by Congress. It looks complicated, right? Because Congress made it complicated.

Again, Congress has made these tax laws.

I mean if you want another source here’s the tax rate table / tax schedule from T. Rowe Price…

IRS Tax Rate Schedules – T.Rowe Price

The Federal Income tax was made via the 16th amendment back in 1913 – “Passed by Congress on July 2, 1909, and ratified February 3, 1913, the 16th amendment established Congress’s right to impose a Federal income tax.

We all pay taxes one way or another… Whether it be through sales taxes, property taxes, estate taxes, federal income taxes, local taxes, state income taxes… That would be another whole discussion topic on it’s own – a Pandora’s box if you will.

Here’s my questions to you:

1 – Since we all pay taxes (one way shape or form) would you still want a ‘progressive federal income tax’ or a ‘flat tax’?

2 – Again, is it the IRS’ fault that our tax system is the way it is or is it Congress who made the actual laws for these taxes?

Visually here’s what a flat tax would look like versus the other Federal Income Tax table I showed to you, up above.

Tax Rates – The Laffer Curve

Pay attention to the Romer & Romer Study.

He does make a valid point.

It doesn’t matter what kind of business you operate or if you’re just an employee for a company… Under the progressive tax system, the more money that you make, the higher tax bracket you’ll be put in and more taxes you’ll pay out of your own pocket.

Obviously, the higher tax bracket you start being into, you find ways to lower your taxes or you just work less.

This adds on to what one of John Stossel’s videos mentioned, the higher the taxes there is imposed – the wealthy or big businesses making big bucks find ways to lessen their taxable income (e.g. work less hours) or move their business outside were they can utilize favorable tax incentives, etc.

America’s Progressive Income Tax overview

Simple example of the Progressive Income Tax

Concept of basic Economics of “Cause and effect.”