@Justice22 That’s not entirely true. The reason we put a 15% tax on Dividends rather then lump them in with all the incomes is that those dividends are paid out of the profits of companies that have already been taxed.
Assume you own all the shares of Widgetmaker and Widgetmaker earned a profit of $100. The federal government took 35% of that at the company level. So now your profits after taxes are only $65. To tax that as regular income let’s say 25 would mean you only get $48.75 or that you were paying an effective tax of 51.25.
Not all income is alike. A better way would be to apply a sales tax to EVERYTHING and be done with it. Then we wouldn’t have to deal with the IRS at all. Only those who wanted to go to the government for money would have to deal with them.
It would be simpler, far less intrusive, fairer (for all) and less costly to implement. But the Government is too fond of trying to control everyone’s behavior through the tax code.
What we have to day is an inefficient unfair mess.
@Justice22 That’s not entirely true. The reason we put a 15% tax on Dividends rather then lump them in with all the incomes is that those dividends are paid out of the profits of companies that have already been taxed.
Assume you own all the shares of Widgetmaker and Widgetmaker earned a profit of $100. The federal government took 35% of that at the company level. So now your profits after taxes are only $65. To tax that as regular income let’s say 25 would mean you only get $48.75 or that you were paying an effective tax of 51.25.
Not all income is alike. A better way would be to apply a sales tax to EVERYTHING and be done with it. Then we wouldn’t have to deal with the IRS at all. Only those who wanted to go to the government for money would have to deal with them.
It would be simpler, far less intrusive, fairer (for all) and less costly to implement. But the Government is too fond of trying to control everyone’s behavior through the tax code.
What we have to day is an inefficient unfair mess.