Are Higher Income Earners Paying too Little Tax?

 According to a recent Gallup poll, sixty-percent of Americans believe high-income earners pay too little tax.  In addition, slightly more than half of Americans support government redistribution of wealth by implementing heavy taxes on those earning over $150,000 per year. Although only 22 percent of Republicans support this redistribution, 80 percent of registered Democrats favor it. Thus, if Hillary is elected president, we can expect a push to begin next year to substantially increases taxes on high earners.
The truth is, top wage earners actually pay a disproportionately higher share of federal income taxes. The highest 10 percent earners pay 68 percent of our nation’s tax obligation, while the top 20 percent pay nearly 87 percent. Certainly, should Trump be elected, Americans reporting high incomes may find themselves in a somewhat better situation. But, how much worse will it become if a Democrat is elected? Regardless, we recommend that high-income earners meet with their tax professional to ensure they have the most effective tax plan a professional can provide.
Strategizing Against a Higher Tax Burden
The Affordable Care Act and other recent bills passed by Congress have increased tax considerations for higher income earners. Recently, the tax code has:
• increased the highest individual income tax rate by over 3.5 percent
• subjected high income tax payers to a 3.8 percent surtax on certain income
• added an additional Medicare surtax of 0.9 percent
• ballooned the long-term capital gains tax by five percent
At the same time, high-income earners are now subject to a step-by-step elimination of itemized deductions and personal exemptions!
If you are in a high-income bracket, there is some good news. You can take advantage of a few Internal Revenue Code incentives by taking a handful of long-term actions. Two quick examples include lowering some tax by gifting your intended heirs, or donating up to 50 percent of your adjusted gross income to charities. Either could result in a net gain if the decrease in your taxable income drives you into a lower tax bracket.
For more information, call Professional Tax Services at 661-259-1967. Professional Tax Services provides unlimited complimentary tax planning advice to their clients through our EZ2 Thrive Program. For more information on receiving advice, visit www.scvprotaxservices.com.