Question

Two unmarried individuals, Albert and Bernia each earn adjusted gross income of $100,000 for tax purposes. Their personal income and professional activities are fundamentally identical. In each of the following independent cases, decide whether the pairs are "equal" who should pay the same amount if income tax or "unequals" who should pay different amounts of income tax.

a. Albert donates $6,000 to the church where he regularly worships and Benita is an atheist who does not make similar expenditures

b. Albert enjoys children and has three children that he supports, but Benita has no children

c. Albert incurs medical costs of $600, and Benita does not incur any medical costs

Answer 1

Answer :

a.         The tax law allows taxpayers to deduct charitable contributions as an itemized deduction. Thus, the tax law implicitly considers Albert and Benita to be “unequals” in the first case. However, one can argue that giving or not giving to religious organizations is a matter of personal choice that should not be subsidized indirectly by others paying more taxes.

b.         Similarly, the tax law allows parents to lower their taxes by claiming dependency exemptions. However, one can argue that people who choose not to have children should not indirectly subsidize those who do have children by paying more taxes.

c.         The tax law allows taxpayers to deduct medical expenses as an itemized deduction only to the extent that these expenses exceed 10% of Adjusted Gross Income. Thus, the tax law implicitly considers Albert and Benita to be “equals” because Albert’s medical costs are not sufficiently burdensome economically to merit a tax deduction, and Benita likewise does get any tax deductions.