Final answer:
The statement is false(2); the standard deduction actually reduces taxable income, which could lower tax liability rather than increasing it. It simplifies the tax filing process and forms part of a system of progressive taxation.
Step-by-step explanation:
The statement that the standard deduction subjects more of a taxpayer's income to Federal income tax liability is False(2). The effect of the standard deduction is actually the opposite; it reduces the amount of adjusted gross income that is subject to federal income tax, thus lowering the overall tax liability for the taxpayer. When we calculate taxable income, it is the adjusted gross income minus the standard deduction and personal exemptions. This is because the standard deduction serves as a portion of income that is not taxable, which means taxpayers only pay federal income tax on the remaining income after the deduction has been applied.
The more complex the financial situation of an individual, the more likely they are to benefit from itemizing deductions. However, for many people, the standard deduction simplifies the tax filing process and can lead to a lower tax bill. The tax rate applied to a taxpayer's income increases as their income moves into higher tax brackets, a system known as progressive taxation. Hence, as income rises, the taxpayer not only pays more in absolute terms but also a higher percentage on each additional dollar earned.