Why do employees pay a federal income tax,  when employers also pay tax?

Employers pay a tax, and also carry insurance related to the field, along with workers comp., and other regulated obligations,  so why do employees also pay tax, on taxed income made by the business, isnt dual taxation illegal/ unconstitutional?

Update:

But an employee is earning an income on previously taxed income, kayeyK.

Update 2:

*Kayley

Update 3:

cynical, I do agree, 👍the answer, in its genuineness, on the left hand it is identical to the china fuu. A distraction that confuses, and produces complacency. 

Update 4:

Its a write off, Amy. You've no convinced me employees are obligated to pay any federal income tax.

Update 5:

*not

6 Answers

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  • 1 month ago

    The business is not taxed on wages it pays to employees.  Wages paid are an expense that reduces profit and thus reduces tax liability.  They only pay income tax on their profits.

  • 1 month ago

    The burden is shared.

  • danxp2
    Lv 6
    1 month ago

    It is not illegal or unconstitutional to tax something twice. A city, county, state, and federal government can all tax the same thing/dollar.

    You tax the widget parts when imported, you tax the finish widget when exported, you tax the widget when it is sold at the mega store, you donate the widget to a charity and the charity sells the widget there is a tax, the widget is a found collectable and sold from pawn shop or second hand found goods market it is taxed. If something changes hands it can be taxed unless there is a specific exclusion.

    You want to argue money is different fine, that is your prerogative and are welcome to take this to court if you want, I wish you best of luck.

    However taxation is cyclical. Customers pay a sales tax, company pays an income tax on profits after expenses (including employee wages, workers comp, cost of goods sold, etc.) Employees pay an income tax on their wages. After taxes people buy things, save money, or invest it, there is a tax on the savings earned, or gain on investment, then buys things paying a tax, and the company uses that money to pay taxes, pay employees and the cycle continues. 

    If you as a business make 1,000,000 in sales you as the business get to deduct your costs like wages, internet, advertising, cost of goods, employee wages, etc. If you don't make a profit after expenses you don't pay any income tax.  

    You would have a better argument about dividends paid out by corporations as double taxation, as corporations do not get to deduct dividends from their profits pre-tax like they can for other expenses, and when investors get this money they are required to pay income tax on them. This is not unconstitutional or illegal. Why is it not illegal or unconstitutional because of the 16th amendment to the constitution.

    "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

    If your end game is to earn money and pay no income tax invest in local muni bonds and see the interest be paid to you tax free. 

  • Amy
    Lv 7
    1 month ago

    You're wrong about the money being previously taxed.

    Employee salaries are a business expense. The employer pays tax on its profit AFTER subtracting expenses from revenue.

    For example: business spends $400 on materials and $1000 on salaries and $100 on advertising to make products it sells for $2000. Business pays tax on the $500 profit. (And very likely, business moves to a state/country with no or very low tax on business profit)

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  • 1 month ago

    That's an argument often made to eliminate corporate taxation!  The response is, to quote the president on Corona: it is what it is.

  • Anonymous
    1 month ago

    There is no dual taxation in your scenario.  If a business earns $1,000 and pays you $100 in wages, the business will pay income tax on $900.  You will pay income tax on $100.  In total the business and you will pay tax on $1,000.

    When you are paid the $100, 6.2% is deducted for social security tax and 1.45% for medicare, a total of $7.65.  Your employer also pays $7.65 in payroll taxes which is also deductible from taxable income for the business.

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