As of 2014, Mr. and Mrs. Smith and their 2 children live in a comfortable house

Question

As of 2014, Mr. and Mrs. Smith and their 2 children live in a comfortable house that has mortgage. Together Mr. and Mrs. Smith make $125,000 per year. They struggle to make ends meet and are just about able to keep their heads above water.

Mr. and Mrs. Jones also have 2 children and live in a modest house similar to the Smith's. During 2012, through smart investing, Mr. and Mrs. Jones made over $1,000,000,000 (that’s 1 billion) in taxable income. They paid their taxes and immediately decided to take their $1 billion out of the bank and other financial institutions that paid dividends, interest, etc.

For the 2014 tax year, the Smiths will have to pay federal tax of $14,670. The Jones will pay $0. Does this seem fair to you? Why or why not?

Mr. and Mrs. Jones have publically boasted that they will pay nothing in taxes for the rest of their lives. Should society expect more from the Jones?

Given the Jones’ situation, should Congress address taxpayer “money hoarding” in terms of further taxation possibilities?

Explanation / Answer

The answer is more of subjective one but still i will give my opinion on this.

Yes it seems fair to be. If you see they are two types of taxation . Direct and Indirect. The question you mentioned is direct taxation related and they are not going to pay for it . But they will be paying indirect taxation in different kinds like VAT,Custom duty,Service tax etc whih they can not escape. In the year he gained the money he would have paid all the taxes like capital gain tax etc .

Ethically and morally if you say yes, but it is upto the individual perspective how he wants to build an image in the society. Since Jones is a normal person(I suppose) there is no need of him to be boasting in public and he can be quiet and not paying taxes.

Yes, they should develop a bill regarding it pass it in house. But there should be some quantitiaive and qualitative factors should be considered in this. Since a person keeping money at his home is just like wastage as you can see based on time value of money , the value of it willl keep cominfg down only.

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