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Paying income taxes might not be your favorite thing, but they serve a purpose.
Eliminating them could cause a ripple effect that raises thecost of livinghigher than it already is.
Some costs might take time to increase, while others will be more immediate.
Housing
Rent and home prices could increase dramatically, Damsky said.
Without income taxes, take-home pay will jump.
This might sound like a good thing, but he said it could backfire for homebuyers.
That additional monthly income will go into themost unaffordable areaof the markets, like housing, he said.
This marks a 4.8% year-over-year increase from May 2023 and a 25.9% year-over-year increase from May 2022.
Wages
As demand increases, prices will rise and wages will tag along, Damsky said.
Saving will become much more challenging as inflation increases, but savers will be rewarded as asset prices climb.
Those with the means to save money during inflation may benefit from the ability to grow their assets faster.
However, higher prices for everything including stocks could make building wealth harder for everyone else.
One year later, the Individual Income Tax Act was passed, establishing the standard deductions onForm 1040.
If you pay federal income taxes, youre certainly aware of the money missing from your paycheck.
However, you might not know much about the key services your tax money actually funds.
Individual income taxes are a major source of revenue for the federal government.
Some of the federal governmentsmain spending categoriesinclude income security, Social Security, health, national defense and Medicare.
Exactly what would happen to all of these programs without funding from individual income taxes is unknown.
Its possible the federal government would have to borrow significantly more money regularly, largely increasing the national debt.
This could be detrimental to both Americans and the country as a whole.
Increased inflation, paired with a potential threat to major essential services is definitely something worth noting.
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