The U.S. Tax System: Inequality’s best friend

Why do we pay taxes, and what has gone wrong with our system? The first in a two-part article series on taxation and real estate.

For more on how the tax system affects real estate, see Part II of the series, see Don’t be a sheep: Take action on income inequality and support your community.

“I pay more taxes, but I end up with more money”

The U.S. has a progressive tax system, meaning the bigger your paycheck, the more taxes you pay. The amount of taxes paid is based on tax brackets assigned to graduated levels of taxable ordinary income.

As an individual’s annual earnings increase, he is shifted into a higher tax bracket, and thus pays more taxes. However, earnings derived from ordinary income (e.g., paychecks for goods produced and services provided, rents, interest) is not the only source of an individual’s taxable income.