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Kozi Checks & Balances TaxTactics News

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September 18.2025

2 Minutes Read

Is the US Tax Code Fair? Examining Its Progressivity and Impacts

Spreadsheet and calculator detail for US tax code analysis.

Understanding the Fairness of the US Tax System

Is the US tax code fair? Many Americans think otherwise. According to a recent poll, about 65% of taxpayers believe it is not, with a significant portion feeling that higher earners should contribute more in taxes. This sentiment brings forward an important discussion about the progressivity of the tax code—essentially, how it impacts different income groups.

What Does Progressivity Mean?

A progressive tax system requires those with higher incomes to pay a larger percentage of their income in taxes compared to lower-income taxpayers. The opposite, a regressive tax system, places a heavier burden on those who earn less. In the US, the tax system is designed to be progressive, especially at the federal level where individual income tax plays a critical role. This means that as you earn more, you’re taxed at higher rates—making wealthier individuals contribute a larger share of total tax revenues.

Insights from Recent Data

Recent IRS data highlights that the top 50% of earners are responsible for 97% of federal income taxes, leaving only 3% for the bottom half. Moreover, lower-income individuals often benefit from refundable tax credits, which can result in negative effective tax rates, essentially giving them more in benefits than they pay in taxes. This reflects a genuinely progressive system where low-income families receive significantly more assistance than taxes they contribute.

Reinforcing Progressivity with Legislation

Recent changes in tax legislation, like those from the One Big Beautiful Bill Act (OBBBA), focus on maintaining the progressive nature of the tax code. While new additions were made, the structure that taxes higher earners more heavily remains intact. This is a reassurance for those advocating for tax reforms aimed at fairness.

Looking Ahead: The Future of Tax Progressivity

It is clear that the US tax code has evolved over the last century, becoming more progressive rather than less. Looking ahead, it’s vital for policymakers to consider how any new changes will affect this balance. Ensuring that fairness is preserved in tax policies that reflect the diverse economic backgrounds of taxpayers is essential for a harmonious society.

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12.16.2025

Can Excise Taxes Truly Replace Property Taxes? An In-Depth Analysis

Update Why Excise Taxes Cannot Fill the Gap Left by Property Tax DeclinesIn the landscape of burgeoning local tax debates set for 2026, one truth remains steadfast: excise taxes cannot feasibly replace property taxes. As housing prices in the U.S. have surged, the impact on local governments’ revenue streams from property taxes has become more significant, particularly in states like Nebraska, where proposed tax reforms are riding on the need to address skyrocketing property values.From January 2020 to July 2025, average home prices rose by a striking 55.9%, which outpaced wages and inflation—an alarming trend that homeowners dread as they anticipate rising property taxes. It’s crucial to recognize that property taxes are the backbone of local governmental revenue, representing around 70% of all local tax collections and exceeding income tax revenues by a large margin.The Inadequacy of Excise TaxesFaced with potential shortfalls, states are considering increasing excise taxes—levies on specific goods like tobacco, gasoline, and alcohol—as alternatives to property taxes. However, the data shows an inherent problem: excise taxes have a narrow base and are traditionally volatile, fluctuating with market cycles and consumer preferences. For instance, Nebraska's cigarette tax managed only $52 million in revenue last year, a far cry from the $5.3 billion raised through property taxes.This gap highlights that the alternative revenues from excise taxes cannot bridge the substantial funding requirements needed for essential local services such as education and public safety. With the steady decline in excise tax receipts, especially related to shrinking tobacco use, the viability of this approach is highly questionable. As reported, real cigarette revenues in Nebraska dropped two-thirds since their peak 50 years ago.Community Services at RiskMunicipalities depend on these essential services to function. As property taxes provide critical funding for schools, police, and fire departments, any attempts to replace such a crucial revenue source with excise taxes represent a shortsighted solution likely to endanger community services. Homeowners may welcome lower property taxes, but they must understand the consequences of such drastic tax replacement strategies.The overall lesson is clear: for local governments to maintain stability and have adequate funding for vital services, property taxes should not only remain but be treated with the importance they merit during these debates. The conversation must shift toward efficiently managing property taxes rather than replacing them with less stable revenue generators.

12.12.2025

The Impact of QSBS Exclusion on Investment: A Misguided Incentive?

Update Questioning the Efficacy of QSBS Exclusion Investment incentives designed to stimulate growth can sometimes have unexpected ramifications. The Qualified Small Business Stock (QSBS) exclusion, which allows investors to exclude capital gains from certain small business stocks, is a classic example of a policy that may do more harm than good in the long run. Intended to encourage investment in budding startups, it instead distorts business decisions by favoring certain structures and industries, ultimately leading to economic imbalances. How QSBS Distorts Business Decisions Investors often find themselves navigating a complex landscape shaped by this tax exclusion. To qualify, companies must adhere to stringent rules: they must be domestic C-corporations with gross assets under $75 million and must actively conduct a qualified trade or business using at least 80% of their assets. This creates a scenario where business growth or investor decisions hinge less on fundamental strengths and more on tax qualifications, potentially leading to missed opportunities in more deserving sectors. How the OBBBA Shapes QSBS Landscape The One Big Beautiful Bill Act (OBBBA) made notable modifications to QSBS rules, raising the exclusion limit from $10 million to $15 million for investments made after July 4, 2025. Such financial incentives can lead to skewed investment patterns, as they shift focus away from innovative or impactful industries in favor of those that meet the technical requirements of QSBS. The Case for Simplifying Tax Incentives Critics argue that rather than maintaining a convoluted tax structure that incentivizes only specific outcomes, a broader, simpler approach like expanding expensing provisions could yield a more neutral playing field. Such a change could provide a pro-growth environment where businesses are incentivized by actual economic performance rather than arbitrary tax benefits. Rethinking Investment Strategies Investors must remain adaptable as they confront the landscape reshaped by QSBS and its recent expansions. Understanding the nuances of these regulations can prove crucial, especially for early-stage employees and startup founders who may be navigating their stock options and equity compensation. With many states imposing their taxes on QSBS gains despite federal exclusions, comprehension of regional tax implications becomes imperative. Empowering Communities Through Informed Investment The complexities surrounding QSBS highlight the need for grassroots financial education. For community stakeholders, grasping these intricacies isn't just about maximizing financial returns; it's about ensuring stability within local economies. By fostering informed investment and encouraging the right types of business growth, communities can harness these incentives to their advantage. It’s time to take a step back and rethink not just how we promote investment, but how we can do so in ways that serve both businesses and the larger economic community effectively.

12.11.2025

Unpacking the OBBBA: A Close Look at Debt, Deficits, and Tax Revenue

Update Understanding the OBBBA's Fiscal Impact and Future TrendsThe One Big Beautiful Bill Act (OBBBA), set against a backdrop of rising national debt and ongoing economic challenges, is entering the fiscal dialogue with significant implications for the future of U.S. economic health. As projections suggest that public debt could soar to 124% of GDP by 2034, it's essential to unpack how this legislation interacts with existing fiscal dynamics.What Does the OBBBA Entail?At its core, the OBBBA represents a substantial tax cut—estimated at $5 trillion over the next decade. While this sounds promising as it aims to stimulate economic growth by reducing individual income tax rates, it adds a layer of complexity due to its potential to escalate national deficits. According to recent modeling, even accounting for spending reforms, the OBBBA is projected to increase the deficit by approximately $3.8 trillion, which puts additional strain on the already rising debt levels.Implications for Tax Revenue and Deficit SpendingThe act's design ensures it is impactful, but it poses questions regarding sustainability. It's projected to boost GDP modestly by 1.2%, enhancing economic conditions but creating a higher deficit-to-GDP ratio. When considering historical trendlines of revenue—which is expected to average around 18% of GDP—there's a clear indicator that if spending cuts are not balanced effectively, we could face severe fiscal cliffs that threaten financial stability.Potential Tariff Benefits Against Debt IncreaseMoreover, the introduction of new tariffs under the Trump administration may offset some costs of the OBBBA, providing an additional $2.1 trillion in revenue, reducing the net increase in deficits to about $1.4 trillion. However, these tariffs also carry their own economic implications, potentially leading to tariff-induced inflation and challenges for consumer spending, complicating the economic landscape further.Future Outlook and RecommendationsLawmakers are encouraged to consider healthcare and old-age programs that significantly contribute to the nation’s debt as they navigate impending fiscal policies. Crafting a bipartisan fiscal commission could be a prudent step towards addressing these critical long-term issues. Ensuring that the economic growth promised by the OBBBA is sustainable is vital for protecting the fiscal health of the country and avoiding a crisis that might necessitate drastic adjustments in the future.

Is the US Tax Code Fair? Examining Its Progressivity and Impacts

Understanding the Fairness of the US Tax System

What Does Progressivity Mean?

Insights from Recent Data

Reinforcing Progressivity with Legislation

Looking Ahead: The Future of Tax Progressivity

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