The Rich and The Not-Rich
In my previous post on “Earned” vs. “Unearned Income”, I concluded that the IRS keeps Americans at the bottom and the middle of the income scale from achieving their “American Dreams” by use of “limits” on contributions, and “carry over deductions” .
As proof, I’m going to show about two examples of IRS tax credits for charitable giving that serve to keep the Not-Wealthy down.
Then I’ll reveal how the wealthy avoid paying taxes on their unearned incomes. Because, in actuality, today there are only two social classes left in the U.S. – The Rich and The Not-Rich.
The Not-Rich are workers: the Rich are investors and inheritors.
I will show that workers, including self-employed professionals and small busines owners, earn lower incomes, while being taxed at significantly higher tax rates on their earnings than investors.
Why? Because the IRS limits the amounts that workers can use their”earned” or “unearned income” to obtain tax credits (i.e., deductions from gross income) on their taxes.
Meanwhile, IRS tax shelters on “unearned income” (i.e,. investments and inhertiances) by the rich are making them even richer.
Ways The IRS Holds the Not-Wealthy Down
The IRS allows those who make “earned income” only very small portion of the the huge amounts of untaxed income granted to wealthier taxpayers who make “unearned income” from their inheritances and investments.
The IRS calls tax loopholes for the not-wealthy “Deductions” or “Credits”. “Earned income” ensures that workers will rarely be able to progress up the ladder to become wealthy after they are taxed. Here’s why:
Read some of the instructions in IRS manuals or on its web site. You’ll see the word “LIMITS”.
Like traffic signs they’ll blare at you! You’ll also see the phrase “CARRY OVER” combined with this word “LIMITS“.
I first became aware of limits on tax credits for middle class earned-income workers when I got a 20 percent homeowners’ credit for my first-time mortgage on a condo.
Every tax year there would be a limit on how much money I could claim credits for. Every year I had to carry over money until the next tax year. Over ten years of payments, I never even got close to getting 20 percent deductions on my taxes! Continue reading →