Final answer:
Taxpayers can offset capital gains with capital losses and deduct up to $3,000 of excess loss against ordinary income annually, with any remaining loss carried forward indefinitely. The Tax Cuts and Jobs Act reduced the top marginal tax rate, affecting the tax obligations of high earners.
Step-by-step explanation:
Taxpayers can completely offset capital gains with capital losses. If there remains an excess capital loss, taxpayers can deduct up to $3,000 per year against ordinary income. The loss exceeding that amount is carried forward indefinitely.
The Tax Cuts and Jobs Act of 2017 has had a significant impact on the structure of tax brackets and rates, particularly reducing the highest tax rate from 39.6 to 37 percent. Despite the presence of various tax credits, deductions, and incentives, it's evident that the top income earners pay a disproportionate share of the income tax burden.
For instance, as per the Pew Research Center's analysis of 2014 tax returns, only 2.7 percent of filers earned more than $250,000, yet this sliver of taxpayers contributed 52 percent of the total income tax paid.
This highlights the progressive nature of the U.S. tax system where high earners contribute a larger percentage of taxes, which in turn can often be offset by capital losses against capital gains, and beyond that by up to $3,000 against ordinary income with the excess being carried over into subsequent years.