The Politics of Taxation and Social Security in the United States
Understanding the intricate interplay between taxation and social welfare systems in the United States is crucial for analyzing the current political landscape. This article delves into the current state of the Social Security program and the income tax policies, particularly focusing on the income brackets and federal poverty guidelines.
1. The Pay-as-you-Go Model and Social Security
In the United States, the Social Security program operates under a pay-as-you-go model. This means that current workers are responsible for funding the benefits of current retirees, with a stipulation that retirees must have paid a minimum amount into the system. However, with the socioeconomic landscape continually evolving, the question arises: should some individuals contribute nothing but still receive a lifetime of benefits?
As of the current political stance, benefit payments to lower-income individuals are skewed in favor of those with lower incomes as their benefits increase proportionally compared to middle- and upper-income recipients. These individuals receive a higher percentage of their contributions in return, raising debates on the fairness of the system.
2. Income Tax Exemptions and Federal Poverty Guidelines
The income tax system in the United States has a significant number of exemptions and banding, particularly for those below the federal poverty guidelines. Understanding these exemptions is essential for comprehending the financial burdens on lower-income families.
2.1 Federal Poverty Guidelines
The federal poverty guidelines are dynamic and vary year by year. For the fiscal year 2018 (note: figures adjusted for inflation may be used in the most current data), the poverty levels are:
Single person: $12,140 Two-person household: $16,460 Three-person household: $20,780 Four-person household: $25,100These figures can vary significantly depending on the state, with Alaska and Hawaii having higher poverty rates and additional state taxes to consider.
2.2 Income Tax Exemptions and Taxable Income
For the 2018 tax year, the standard deduction for a single person without children was $12,000, while the federal poverty level for a one-person household was $12,140. This means that a single person earning $12,140 would have a taxable income of $140, and could potentially pay $14 in federal income taxes.
In a two-person household with no children, the federal poverty level was $16,460 and the standard deduction was also $12,000. Therefore, a married couple earning exactly $16,460 would likely have a zero taxable income and would pay no federal income taxes. Additionally, they might even receive a tax refund due to child tax credits.
For a three-person household, the federal poverty level was $20,780, with a standard deduction of $24,000. If a married couple with one child earned $20,780, they would have a zero taxable income and might receive a tax refund.
The situation for four-person households is similar, as their standard deduction of $24,000 matches or exceeds the federal poverty level, potentially allowing them to have zero taxable income and possibly receive a refund.
However, for larger families or single adults with children, the situation changes as they start to owe federal income tax.
3. Enhancing Tax Policy for Modest Income Families
There is a growing argument that people with incomes at or below the federal poverty guidelines should not be required to pay federal income taxes or file returns. In my opinion, the standard deduction should be significantly increased to around $75,000 for a married couple. This would substantially reduce the burden on lower-income families, making tax filing processes simpler and more manageable.
The U.S. needs to reach a point where a substantial percentage of people with modest incomes are exempt from federal income taxes, not just through deductions but through practical reform to the current tax code.
4. Conclusion
The United States' taxation and welfare systems are fundamental to its political and economic structure. By examining these systems, policymakers and the electorate can better understand and advocate for changes that reflect the needs of all economic segments of society.
Keywords: Social Security, Income Tax, Federal Poverty Guidelines, Pay-as-you-go