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**Hugh** · 10-08-2023, 19:15

Pure coincidence, I’m sure…

---------- Post added at 18:15 ---------- Previous post was at 18:01 ----------

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Originally Posted by Sephiroth

Utter red herring (highlighted red).

You may find this informative…

https://theconversation.com/american...as%20drawbacks.

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Americans spend more time and money filing their taxes than residents of other countries

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Other countries retain progressive systems with fewer tax brackets. For example, the U.K. currently has four tax brackets, compared with seven in the U.S.

The U.S. also has different rates for ordinary income such as wages versus income such as dividends and capital gains, which are typically taxed at lower rates – in part to spur investment and also because investment income has arguably already been taxed. But the U.S. system adds complexity because capital gains on investments held for less than a year and some dividends are not taxed at preferential rates. These different rates – from different levels and types of income – reduce the chances of getting withholding right.

The U.S. system also adds complexity with the sheer number of deductions and credits available to taxpayers. Deductions reduce the amount of taxable income you have, thereby reducing your tax liability. Say a single individual has $80,000 of wage income and $15,000 of deductions. Their taxable income is $65,000. At 2022 rates, their tax liability is $9,617. Those $15,000 of deductions saved them $3,300 in taxes.

Fortunately, there are a lot deductions. Unfortunately, taxpayers often have to jump through hoops to qualify. You can deduct gambling losses but only if you have gambling winnings, state income taxes but only up to $10,000 each year, and student loan interest but only if you make less than $85,000 or $175,000, depending on your marital status.

Further, these deductions come in different flavors: “above-the-line” deductions and “below-the-line” deductions, which themselves come in two flavors – itemized and standard. Taxpayers itemize deductions only if those amounts exceed the standard deduction. That means you might spend several hours tallying receipts for itemized charitable donations only to find you can’t deduct any of them because the total is less than your standard deduction.

Credits are another valuable element of the tax system because they reduce your tax liability dollar for dollar. Let’s go back to our single taxpayer with $65,000 in taxable income and a $9,617 tax liability before credits. A $1,000 credit – say for higher education or renewable energy – reduces their tax liability to $8,617. But credits also add complexity because they can be reduced as your income increases, and they can have extensive eligibility requirements.

Thanks, but no thanks…