How many taxes

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Ellen Chang Contributor. Kemberley Washington Forbes Advisor Staff. Because of the IRS budget reductions and the resulting declines in headcount and enforcement, the difference between the tax revenue owed to the government and the amount collected is mounting.

Taxpayers who comply with tax laws are surely disquieted by reports that IRS budgets and enforcement activities have declined markedly since As its workforce has become smaller, the IRS' statistics—as well as expert analyses and general media reports—have revealed that it is conducting fewer audits, with the most significant reductions occurring in audits of wealthy individuals, large corporations, and pass-through businesses and their owners.

Would some other tax system work better and be fairer? From time to time U. A flat, single tax rate on all income has had some adherents who emphasize its simplicity and argue that it would be fairer to charge all taxpayers the same rate.

However, to raise the level of revenue required for government operations, it would be necessary to adopt a rate so high that the burden on lower-income taxpayers has been judged economically and politically unrealistic. Flat-rate tax credits, particularly refundable ones, provide the same level of benefit to all taxpayers regardless of income. Similarly, when a value-added tax VAT or consumption taxes on goods and services have been examined, the exemptions required to avoid overly burdening low-income taxpayers entail significant complexity.

The need to devise rules to cover groups enjoying special benefits under the income tax system—not only specific industries but also the very significant charitable sector—would also be problematic.

Recently, a flat rate annual tax on wealth has been proposed by advocates generally motivated by growing economic inequality and greater concentration of wealth in a smaller percentage of the population, as well as the goal of increasing revenue.

Although many, including economists and political scientists, have expressed concern about the concentration of wealth, the wealth tax proposal has not gained widespread support. This type of tax would entail significant complexity, particularly the difficult and burdensome task of valuing assets, such as works of art or private businesses, lacking a readily available, objective market value. Even if such alternatives to the present system were deemed feasible, the transition from the present income tax laws to an alternative regime presents challenges so far judged prohibitive.

The enactment of some supplementary tax regime—or the revision and expansion of the current excise tax and tariff rules to supplement the income tax—would avoid some complexities but would increase administrative burdens for taxpayers and officials.

With the U. Changes might include the restoration of an improved corporate AMT and broader application of rules to prevent business losses from offsetting income from unrelated sources. Better tax enforcement through restored and increased funding of the IRS is also needed. Studies indicate that more and better auditing of high-net-worth individual and large-corporation tax returns would substantially reduce the tax gap.

For example, with increased funding, IRS auditors would be able to devote the time required to evaluate complex facts and circumstances to determine if business expense deductions were necessary and reasonable in amount.

An to-1 return on investment in more thorough and better-targeted auditing and enforcement justifies increasing the IRS budget. Improvements in both these areas should pay the additional dividend of building taxpayer confidence in the tax system. Pew Research Center. Internal Revenue Service. Accessed Oct. The New York Times. Tax Policy Center. Data Lab. Accessed Oct 26, Social Security Administration.

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Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. You have money questions. Bankrate has answers. Look at the tax brackets above to see the breakout. That's the deal only for federal income taxes. Your state might have different brackets, a flat income tax or no income tax at all. Your marginal tax rate is the tax rate you would pay on one more dollar of taxable income. This typically equates to your tax bracket.

Two common ways of reducing your tax bill are credits and deductions. Tax credits directly reduce the amount of tax you owe; they don't affect what bracket you're in.

Tax deductions , on the other hand, reduce how much of your income is subject to taxes. Generally, deductions lower your taxable income by the percentage of your highest federal income tax bracket.

In other words: Take all the tax deductions you can claim — they can reduce your taxable income and could kick you to a lower bracket, which means you pay a lower tax rate. Estimate your tax bill. Compare the best tax software. Learn about capital gains taxes.