Question

What, exactly, is
the Federal Income Tax (FIT)? Roughly, at what income level does each rate
'kick in'? In your opinion, how could this tax be improved?

Answer 1

Answer: Federal Income tax or FIT is a tax imposed by Internal Revenue Service on the Annual earnings of individuals, companies,trusts and other legal entities.

Income tax and federal income tax both are different as in US states governments csn also impose income tax in addition to FIT however 9 state governments don't levy such income tax.

2. There are various slabs under which FIT is levied starting from 10% which is applicable on income upto $9875 as of 2020.After than various slabs i.e. 12% ,22% so on upto 37% levied on different incomes.

3.There are various ways in which this tax system can be improved:

1.Integerate different taxes in to one or in minimum taxes so that loopholes that are being used for tax avoidance can be improved.

2.Tax in income and on capital gains should be made same level.

3.Remove tax limits on social security taxes so the wealthy people pay taxes on their actual taxable income.

4.Releive IRS from auditing poor people.

In conclusion tried to make tax slabs simple and focus on increasing tax base in place of tax rates and reducing loopholes in laws.