The Disconnect Between Wealth and Federal Income Tax Payments: An Exposé

Why don't more wealthy individuals pay substantial amounts of federal income tax even though they possess vast sums of money? This conundrum is often attributed to tax policies that benefit the wealthy. Let's delve into the complexities of how these tax policies work and why they fail to ensure fair taxation.

Hidden Tax Reliefs for the Wealthy

Since the Reagan administration, the Republican Party has implemented a series of tax cuts for the wealthy. These policies are often sold to the public as a means to lower everyone's taxes. However, these cuts mainly benefit the affluent, while the average American receives only token tax breaks. This is achieved through various hidden tax reliefs and slashes in taxes for the wealthy, leaving the broader population to shoulder the burden.

The Impact on the Middle Class and Debt

These discrepancies in tax policy have led to a significant erosion of the middle class and an explosion in national debt. As a result, the majority of federal tax revenues now go to servicing the debt owed to banks, rather than to essential public services and social welfare programs. This situation has been exacerbated by partisan rhetoric that falsely claims the federal government is 'broke,' and robustly blames the poor and entitlement programs for the country's financial troubles. The reality, however, is that the wealthy have been able to avoid paying a fair share of federal income taxes, thus contributing to over-spending on military budgets and corporate welfare programs.

Examples and Exemptions in Taxation

One of the most significant reasons why the wealthy don't pay as much in federal income taxes is the exclusion of capital gains and certain deductions. For instance, Elon Musk, a poster child for wealth and business acumen, does not pay federal income tax because he is allowed to draw no salary and instead borrows against his wealth without a salary, legally avoiding income taxation.

Consider another example: A doctor who has heavily borrowed after completing a residency program to pay for her medical education. Despite a high salary, she is not permitted to deduct the interest on her student loans, which should logically be a deductible expense. Additionally, the distinction between income and wealth necessitates emphasizing that federal income tax is levied on income, not wealth. Wealth is subject to different kinds of taxation, such as real estate and capital gains taxes.

Conclusion

The disconnect between wealth and the amount of federal income tax paid is a result of complex and often hidden tax policies that benefit the wealthy at the expense of the broader population. To address this issue, we need to advocate for a more equitable tax system that ensures the wealthy pay their fair share. This would free up resources to reinvest in education, healthcare, and social programs, ultimately benefitting all Americans.