In the United States of America, personal income tax is the biggest source of revenue collection. Individual income tax levies on salaries of people, wages, investment of an individual, or an income from the household. The United States follows the policy of progressive income tax i.e., an increase in income tax rates also increases. It was established in the year 1913 and ratified by the 16th Amendment.
Federal Income tax: Analysis by William D King
For the year 2021 if the personal income of an individual falls under the category of below 75000 dollars there is no need to pay any income tax on it. As per the nonpartisan Joint Committee on Taxation, the taxpayers will have zero liability after filing for their tax return and after deducing and credits if they come under the category of below 75000 dollars. For people who come in the bracket of $75000 to $100,000, the tax rate for them will be 1.8%.
Under these proposed changes the standard deduction for single taxpayers is 12,550 dollars who are filing individually and for married people who file their returns jointly the bar for deduction is 25,100 dollars. With these changes and the COVID-19 situation in progress, various tax credits are expanded now.
Also, these changes do not infer that if you do not owe anything to IRS on your income it does not mean that one does not have to pay any taxes.
By going with the latest data almost 53% of the people in America have a household income of less than $75000. An average household in America has an income of around $68,000. As per William D King people who are not paying income taxes in any year they tend to have a decent income with children along with older people.
The administration led by Biden has proposed the American Families Plan. Under this policy, they would partially pay for $1.8 trillion on the education of the children and various family programs. An additional tax amount of $661 billion on individuals who earn high and have businesses for example pass-through businesses like corporations, sole proprietorships, and partnerships.
As per this equilibrium model, the AFP’s tax changes will reduce to 0.4% in the long run of GDP. Subsequently, GNP would also fall by 0.6% which will, in turn, lead to a drop in wages for up to 0.4%.
With these proposed changes and amendments the system for taxpayers and administration would become more progressive than it is now. Under the present law by way of higher marginal tax rates on individuals who earn a lot and expanded refundable tax credits for people who do not earn much. These reforms would bring change in all these people’s lives. With these proposed changes there will be a lot of reduction in full-time employment as it will be decreased by around 64000 jobs. This is a big number but for the policy of American Families plan. It is worth a shot.