The Complexity of Federal Tax

The federal tax is complex. This complexity generally stems from 2 factors : the use of tax for purposes other than raising revenue, and the feedback from the amendment of the code. While the main aim is to the revenues of the federal government, the tax is often used to the behaviour of companies and individuals in an attempt to achieve economic, social and political goals.
A theoretically pure income tax would not allow this deduction, not an expense incurred for the production of income. The legislation provides for a tax deduction for mortgage rates to encourage home ownership. The return on the mortgage interest deduction is seen by some as discrimination against taxpayers who rent, instead of themselves, their country of origin: the payment of rent for a home is not deductible. In theory Of course, landlords generate tax savings on their mortgage interest, and let these savings on to tenants.

The government uses the tax code as an instrument of social policy, Because the code as a whole appears to lack a coherent organizing. This lack of a coherent organizing principle has become enhanced over time, as a result of the interaction between the successive legislative changes and changes in the regulations of the law and the private sector responses to these changes and adjustments. For example, suppose that Congress imposes a tax credit to encourage a certain type of activity. In response, a group of taxpayers who are not the intended beneficiaries of the credit again for their business, or the superficial aspects of their affairs, be eligible for the credit.

Congress responded by amending the code to add restrictions and focus on the credit more effectively. Some taxpayers manage to use this change to claim additional benefits, so Congress acts again, ga and so on. The result is a feedback on the adoption and the reaction that, over a longer period, produces great complexity.

In the U.S. generally income tax is highly progressive, at least in relation to persons who earn wage income. As of 2001 the top 1 percent of individual taxpayers paid about 23 percent of all federal taxes. The top 5 percent of paid about 39 percent, and the upper 10 percent pay 50 percent of all federal taxes. The bottom 20 percent of taxpayers paid slightly more than 1 percent of all federal taxes.

In recent years, however, a reduction in the rates of tax on capital gains is a significant drop in income tax on non-wage income. In this context, the general structure of the U.S. tax system has begun to resemble a partial consumption tax. Moreover, the progressivity of the U.S. tax system has gradually increased in recent decades. The top 20 percent of taxpayers paid about 56 percent of all taxes in 1980, and this figure gradually increased to 65 percent, from 2001.