The impact of taxes on low income individuals

Taxes are regular payments made by citizens to their government, whereby they directly contribute to public expenditures, which support services and structures in the community. However, its effect on low-income earners is a matter of discussion and has been widely debated on. In this case, taxes are a burden that has a huge impact on the citizens especially those from the lower income bracket in terms of expenses for fundamental needs and promotion to the next higher class. It is thus important for policy makers to grasp the complexity of the impact taxes have towards the citizens especially those at the lower end of the economic ladder in an attempt to formulate sound tax policies.

Firstly, there are some types of taxes which are considered regressive and have a negative impact on those with lower incomes. For instance, sales taxes cost a smaller proportion of income from those with richer incomes than from those with low or average income. Essential commodities like food, clothing, and transportation services are luxury assets for low-income households, and when they purchase these products, the sales tax incurred is proportionately high compared to their measly income. While those households pay a considerable amount of taxes since they have more disposable income as compared to the lower-income earners. When the value added tax increases, this regressive tax bur- den can deepen the hardship of low income families and reduce their capacity to save and invest for the future.

Secondly, there are payroll taxes that contribute to sustaining social security and health insurance, as well as minimum wages affect low paid employees significantly to a certain extent. Such taxes are progressive at a given level up to the threshold, implying that a person earning little pays the same percentage of income as a person who earns more on the initial part of his/her income. For those people with low wages, often these payroll taxes cut down the actual earnings beyond reasonable means to support themselves and their families. Furthermore, the advantages received from these programmes, although crucial, might not be sufficient rain to strengthen the social safety net in ratio to the low-income earners’ tax contributions throughout their working span.

Company income taxes, which should be progressive in nature, can also present some difficulties. Even though the tax rate rises with income, low-wage workers could still encounter a high bill in taxes if the tax credits and deductions fail to counterbalance the tax charge. For instance, families who cannot claim some of the tax credits or are too composite to file simple returns get to pay more in taxes. Additionally, the EITC and other programs are helpful but still do not eliminate the tax burden for some workers and specifically childless workers.

Additionally, there is a concern that unavailability of cheap tax preparation services can negatively impact the poor. Most use paid tax preparers who set fee charges that take a significant portion of the refunds or income. The tax code can be abused or have errors or missed credits or deductions thus adding to the disadvantaged position of the less privileged citizens. Some of these could be reduced by simplifying the tax code and offering increased and cheaper tax assistance.

Hence, the psychological and social effects of taxes in the lives of the low income earners should not be underestimated. Tax debt affects people through potential negative health effects, lower income, and limited access to education and job promotions. This shows how the struggle between paying taxes and basic necessities keeps individuals in the cycle of poverty. Measures that offer some form of respite, including tax credits, free or low-cost tax-filing services, and a fair taxation system, are necessary to address these impacts.

In conclusion, though taxes are paramount for financing public goods and services, the cost of such Public goods affect the low income earners in one way or the other. Highly regressive, payroll taxes are cited as a cause of enough financial pressure for the less privileged through regressive taxes, complex structure of the income tax system as well as the cost of hiring tax preparers. Working to solve these concerns through effective policy modifications can lead to proper taxation reforms that contribute to the financial well-being and development of individuals with low income. Maintaining fairness of tax laws is a key trait that has to be met in order to promote equal chance of success for all people.