Case4 Article Example | Topics and Well Written Essays - 250 words

Case4 - Article Example This happens even despite the fact that the author made that amount of money in a short period of time. The issue of income averaging does not work in favor of the people who receive payment in large lump sum payout. This is because a tax rate of certain number of years would produce a total tax bill void of present value considerations with more than fifty percent of marginal rates. Introduction of the income splitting with joint returns in 1948 meant that the overall difference between the tax on the lump sum payment in five year distribution with income splitting amounts to over fifty percent of the money to be paid with the lump sum tax of more than two percent the amount of the smaller tax bill. The case is relevant to the American federal income tax system in the sense that it talks about the impacts of high marginal rates with enormous progressivity. Therefore, in order to ensure fairness, the federal income tax system need to introduce income splitting and averaging provisions in the tax policy, and lowering the marginal rates as well as decreasing the number of brackets. Just like my colleague Robert referred to Mikesell’s work that splitting the income in the five year phase would lessen the tax load from $85,092 to $48,213, I agree that this would be a big step in adjusting the federal income tax system operations. For example, altering the dollar amount would act as an effective way of lessening the marginal rate from approximately 84.55% to 56.05%. To revise the tax code, income averaging can be considered to promote compliance with the current tax system, which depends on the corporation of citizens to pay the shares. These measures ensure that individuals a re not taxed heavily since their taxes are calculated on the present value of their