Monday, 21 January, 2019

5 things to know about Tax Day: refunds are up, audits down

Nellie Chapman | 19 April, 2017, 01:41

But most folks must work through January to pay off federal income taxes. Lawmakers are now looking at the 2016 House Ways and Means Committee Republication Blueprint and Representative Camp's 2014 Tax Reform Proposal as templates for tax reform; both of which advocate lowering the corporate income tax rate to as little as 15%, while also making specific alterations to long standing Code sections and changes to existing tax adjustments that could result in increasing taxable income. But a lesser known narrative also comes with the deadline: Surveys show that more than 85 percent of respondents say it's not at all OK to cheat on taxes, while more than 90 percent said paying up is every American's civic duty. But that increase, now bringing in about $600 million a year, was supposed to make up for eliminating all school operations property taxes on owner-occupied homes, which now saves homeowners more than $700 million a year.

In other words, if you owe Uncle Sam money, you need to pay up, no matter where you live.

Aside from leading to a GDP and jobs boom, the approach will address two current tax conundrums. For all respondents, the poll has a credibility interval of plus or minus 3.5 percentage points.

Less were bothered by the complexity of the tax system (43 percent). A similar proportion said they were not too much or not at all bothered by the amount they themselves pay (46 percent). Higher rates? Fewer "loopholes?" Political rhetoric? Accusations of greed? And in most countries, including the USA, the well-off pay far more than lower-income people.

Research from The Heritage Foundation's Center on Public Opinion suggests that it is definitely not the latter. Americans' inaccurate understanding of who pays what taxes in this country likely drives their sense of unfairness.

When federal and state taxes are added together, the average corporate tax rate in the 39 percent. And, for the top 1% of Americans, the effective federal tax rate is 33.4%, almost 10 times what those in the lowest quintile pay. The most common answer was 35 percent (16 percent of respondents said this). That averages out to more than Americans will spend on housing, food and clothing.

Another study conducted in December 2014 found a similar gap between reality and perception in personal income taxes. "The vast majority (more than 99% in fact) of individual tax returns skate safely past the IRS audit machine" and three-quarters of all audits are handled my mail, not an in-person meeting with the IRS.

Americans were fairly accurate when it came to who earns what: They guessed on average that the top 10 percent of Americans earned 41 percent of American money, when in fact they made 45 percent of American money. Liberty expands as corporate tax professionals, not individuals, collect and pay consumption taxes to the IRS. "But people really are committed to tax-paying as a civic responsibility". Not the U.S. At the top are Belgium and France, while workers in Chile and New Zealand are taxed the least.

The results indicate that when it comes to actually working out the numbers in their heads, Americans don't think the tax scale is as graduated as it is. The Medicare tax in the United States used to be a flat tax, until the additional Medicare tax on higher earners was implemented.

In a response to their critics, Gilens and Page wrote, "The affluent are, not surprisingly, (even) better at blocking policies they dislike than achieving policy change they desire".

When asked after hearing the true proportions of income earned and taxes paid, the proportion of Americans saying they think the top 10 percent of earners doesn't pay enough in taxes decreased by 31 percent.

The proportion saying they pay about the right amount increased 20 percent, and more even said that they pay too much (+11 percent). That's one finding of the Ipsos poll conducted for NPR, which delved into what Americans know and what they believe is wrong with the US tax code. But, barring an unexpected surprise - a W2 form issued by Vladimir Putin, or a 1099 from mafia boss Anthony "Fat Tony" Salerno - we already know Trump's ugliest tax secrets. Rather, there could be important policy implications to Americans' misperceptions about the tax system.