...Federal tax reform has been a topic of discussion for some time now. As the national deficit has continued to increase over the past few years, so has the priority for this analysis. Although a number of proposals have been submitted, the problem is coming to an agreement on how exactly the code should be reformed, if reformed at all versus starting with a brand new code altogether. The problem is that there is no cookie cutter tax system that will be fair to all. With that being said, is a flat tax the way to go? There is no tax system that would be beneficial to all Americans. Just like any tax reform, a flat tax system has its own set of pros and cons. For example, a flat tax system would eliminate the current extensive tax code that is extremely difficult to interpret. It would result in an easier understanding of the tax code as well as reduce the chance for errors and tax fraud (Sonic, 2013, para. 7). Additionally, it would cause a reduction in the need for paid tax preparers, which is actually a pro and con. It would save taxpayers money by eliminating the need for paid tax preparers but at the same time would also cause a reduction in the workforce for that industry (Sonic, 2013, para. 7). As a result, this would cause a rise in the number of displaced workers’ as well as putting numerous tax software companies out of business. Moving on, a flat tax would eliminate the ability to create tax loopholes by the government, as previously done, for personal favors or campaign...
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...progressive income tax system requires a complete overhaul into a flat tax structure. Efficiency throughout all related markets would increase, reducing distortions, and creating greater than ever incentives to work and create capitalist opportunities. It also presents the potential of solving our country’s budget deficit issues. Our current system stymies innovation and the desire to persevere by forcing a higher tax bracket on those who earn more, causing more individuals to pursue avenues of evading taxation, either through legal or illegal means. Even though the flat tax appears as too burdensome to the poor – or as a contributing factor towards the establishment of a “black market” - a flat tax is simply a more equitable system that will solve the federal deficit issues in the United States. Efficiency would rise from five sources. The first is a change of the tax base from income to consumption. The second is the establishment of a more comprehensive tax base, which eliminates the differential tax treatment of various assets and forms of income. The third is the lowering of tax rates, which raises the rate of return to working, saving, and investing. It also reduces incentives to avoid or evade taxes. Next is the reduction of compliance costs , allowing companies to lower their budgets for record keeping return filing, the salaries and training of employees performing these tasks and the costs to obtain the advice of external accountants and tax lawyers. With...
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...A flat tax system is better than progressive tax. Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue . A flat tax would be a certain percent of gross income to be paid by all. Individuals or businesses would pay the same percentage regardless of income, with no deductions. But that would be just as illegal as the system we have now. There is no law allowing the government to collect an income tax. On the other side, A progressive tax is a tax which increases as a percentage of one's wealth. Using the federal income tax as an example, a person who makes between $0-$7,500 pays no taxes, any income between $7501 and $30,650 is taxed at 15%, up to any income above $336,551 being taxed at35%. A progressive tax differs from what people call "regressive" taxes, like sales tax, which takes a larger percentage of money from individuals with less money .First of all, Progressive taxation is widely supported by experts in economics and political science from many different theoretical camps; in the United States and Europe, the majority of authorities supports a progressive tax and advance many arguments for it. For example, they say that progressive tax gives a government more revenue while also enhancing opportunity for its lower and middle class citizens. Without progressive taxes...
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...Common Sense Approach to Reforming the Federal Tax System On February 3, 2013 marked the 100th birthday of the 16th Amendment. The 16th Amendment paved the way for the creation of the federal income tax that continues to this day to have far reaching repercussions on the American tax payer. Before the ratification of the 16th Amendment, the birth of the federal income tax dates back to the Civil War. In order to finance the Civil War, President Abraham Lincoln signed into law Revenue Act of 1861 on August 5, 1861. The Revenue Act consisted of a flat tax rate of 3% on income above $800 and 5% on individuals living outside of the United States. On July 1, 1861 United States Congress repealed the Revenue Act of 1861 and replaced it with the Revenue Act of 1862. The Revenue Act of 1862 introduced a progressive tax and established the Bureau of Internal Revenue. In 1872 Congress repealed the Revenue Act of 1862. One again elected officials tried to revive the federal income tax in 1894. However, in 1895 the federal income tax was declared unconstitutional by the U.S. Supreme Court because the tax was not apportioned according to the population of each state. In an address to Congress on June 16, 1909 President Howard Taft proposed that Congress consider a new amendment to the Constitution. “I recommend, then, first, the adoption of a joint resolution by two-thirds of both Houses, proposing to the States an amendment to the Constitution granting to the Federal Government...
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...many countries applied the system of progressive income tax, which was earlier applied in Western Europe. But it soon turned out to be a system that discouraged economic growth. Therefore, some of these countries since 1994 have established the system of flat tax. Flat tax implies the application of a single-level tax system. Flat tax is applied in consideration of the supposition that all income should be taxed only once during their circulation, precisely when they are owned. Flat tax system refers to the unification of taxes in two taxing plans: personal income tax, which is levied on the total income of the individual and corporate tax, which is levied on the profits made by the companies. Flat tax was firstly applied in Albania during 2008 after two years of debates. The tax refers to the application of a 10% levied on the profit or on the total personal income. Keywords, flat tax, progressive tax, rates taxes, tax system in Albania, the consequences of taxation The notion of taxation has been known since the establishment of states. A social organization, as primitive as it may be, requires sufficient financial means to accomplish its goals. Taxes are a substantial means of providing the financial resources of a country. They occupy the leading place in the public income of modern countries. The great part of our neighboring countries and countries with quite a similar economic situation as ours are applying flat tax. So as to improve the economic situation and the fiscal...
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...the U.S. Tax Code Accounting 307: Federal Taxation Professor Margaret Parrish Kinisha Doley-Griffin November 24, 2013 Should the tax system be reformed or should it not be reformed. That has been the question for years asked by congress and the people. Congress has not acted upon changing the tax system once during the debates. Many proponents of the tax reform support one system over another. We have heard multiple new suggestions for tax codes such as value added tax, a national sales tax, fair tax and the flat tax. The flat tax has been in talk since the 1980’s, it was first suggested by two colleagues at the Hoover Institution, Robert Hall and Alvin Rabushka. Hall-Rabushka proposed that the present system would be replaced with a consumption tax. (Lang, 2012) This means that income would be taxed at the amount withdrawn or initially earned. This is the only time that the money made will be taxed and you would pay no other taxes. The flat rate tax will be set initially at 19 percent and would offer a family exemption. The goal is to have the flat tax rate set as low as possible and to keep the taxation base as broad as possible. Their plan is to maintain revenue neutrality for the government and allow taxpayers to keep more money they earn in their pockets. In my opinion I think that the flat tax rate is as far as one can get. Yes, no one wants to pay taxes at all but living in America this is something that you must do or you will be fined. With the flat tax it will...
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...Should We Switch to Flat Tax? In general, all over the world more than ninety percent of government’s income comprises taxes collected from the public and corporations. American economy is concerned; it is the largest economy in the world. Government collects taxes directly and indirectly from individuals and corporations. Government is not a business entity but the regulating authority of the country. Therefore, government needs to fulfill needs and wants of people through economic activities, regulating the country towards the economic growth. The government frequently changes the economic policies to run the country in an acceptable level. Therefore, taxes are the main weapon used to control the country. American taxation policy for more than decades is progressive. i.e., those who earn more income should have to pay more taxes. This is the main tax policy has been used in America, but tax rate is increasing at the end. Economists and politicians speak about a new topic i.e., flat tax revolution. What is this new tax? That is according to Sexon, “a tax that charges all income earners the same percentage of their income” (240). However, in practice, this is not a new theory; many countries have already been implementing flat tax as the government tax policy. The flat tax system operates well in many countries. Hong Kong introduced this flat tax system sixty years back and Eastern European countries have been using flat tax since the early nineteen eighties. The ...
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...Sarathchandra Should We Switch to Flat Tax? In general, all over the world more than ninety percent of government’s income comprises taxes collected from the public and corporations. American economy is concerned; it is the largest economy in the world. Government collects taxes directly and indirectly from individuals and corporations. Government is not a business entity but the regulating authority of the country. Therefore, government needs to fulfill needs and wants of people through economic activities, regulating the country towards the economic growth. The government frequently changes the economic policies to run the country in an acceptable level. Therefore, taxes are the main weapon used to control the country. American taxation policy for more than decades is progressive. i.e., those who earn more income should have to pay more taxes. This is the main tax policy has been used in America, but tax rate is increasing at the end. Economists and politicians speak about a new topic i.e., flat tax revolution. What is this new tax? That is according to Sexon, “a tax that charges all income earners the same percentage of their income” (240). However, in practice, this is not a new theory; many countries have already been implementing flat tax as the government tax policy. The flat tax system operates well in many countries. Hong Kong introduced this flat tax system sixty years back and Eastern European countries have been using flat tax since the early nineteen eighties....
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...Flat Rate Taxation Taxation is a complex and controversial issue. One of the responsibilities of our government is to raise revenue. The easiest and fairest way to do this is through taxation. There is no way to get around that. Every time I look at my paycheck I see that the number of hours I worked multiplied by my hourly wage rate does not equal to the actually amount of pay I receive. Before I even receive my paycheck money has already been deducted for such taxes as FICA, state, federal and local. Week after week I see more of my earnings taken away. I would like to see a tax system in place that has less loopholes, is easier to understand and is fairer to all working Americans. Our current progressive tax system effectively redistributes income. This means those who earn more pay higher taxes while those who earn less pay less tax. In a way this does seem fair because it closes some of the wealth gaps. The taxes collected by the government are used to fund social programs such as social security, social welfare and public assistance. This is beneficial to struggling families because it allows them to have more money to pay bills and buy necessary products. This system also benefits the wealthy because they have the potential to make more money when the economy is good. Another benefit of the progressive tax system is the continuous flow of money into the economy. A wealthy person will continue to spend money regardless of the amount of money he/she...
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...federal income taxation should be replaced by a flat rate income tax. Speeches and Time Limits Speaker 1 (Team A, 1st speaker ).........................4 min. AFFIRMATIVE (PRO-FLAT TAX) SPEECH - Alastair Pearson: In the words of Adam Smith, the intellectual godfather of modern economics and classical liberalism: “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.” My task today is to prove that the best interests of the overwhelming majority of the American public are served by the imposition of a flat, or proportional, tax – which I define as a solitary income tax with one percentage for the entire tax base, beginning at a minimum income threshold and with deductions for basic necessities (as in Canada, Australia, EU) and exceptions for the taxation of municipal bonds, fire, sickness and accident victims, and charitable and non-profitable organizations. This is in opposition to regressive taxes, which adversely affect the poor, and progressive taxes, which I define as taxes that redistribute wealth towards lower tax brackets. Progressive taxes undermine fundamental democratic values and discourage growth while promoting inefficiency and tax evasion, all by hiking rates arbitrarily on certain subgroups and protecting special interest groups beneath a tortuously complex facade. In 2013, Forbes reported the US tax code has exceeded 4 million words, while the tax preparation industry uselessly employs 800,000...
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...Why Fairness Matters Progressive Versus Flat Taxes Robert J. Shapiro April 1996 Pro gres s iv e FOUNDATION Why Fairness Matters: Progressive versus Flat Taxes Progressive Foundation The Progressive Foundation works to develop and promote a new progressive political philosophy and governing agenda for America based on individual liberty, equal opportunity, civic responsibility, and nonbureaucratic governance. The substantive work of the Foundation revolves around some of the most difficult challenges facing America in the 1990s: assuring upward mobility for working Americans in the new world economy; resolving the great American dilemma of race; restoring a civil society and strengthening the social ties that foster a sense of community; finding America’s proper role in the post-Cold War world; and rethinking the size, shape, and mission of government in an Information Age. The Foundation explores public controversies over cultural questions—race, ethnicity, gender, religion, morality, and civic education—that are often ignored in conventional political discourse. The Foundation’s Project on Tax Reform and Economic Growth works to develop a tax reform program that is consistent with a progressive distribution of the tax burden, and can help promote stronger job and business formation, greater productivity, and higher family incomes. This report is the first of two new reports outlining the essential features of such a tax reform program. The preface contains more...
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...Should The United States Have a Flat Tax? The tax code in America is not only very complex, but most people outside of persons who has received specialized training do not understand taxes, forms, deductions, and various other aspects of the tax code. Not only is it hard to understand, but the time it takes to fill out various tax forms, and understanding the forms without the help of a person that knows all of the deductions and loopholes is almost impossible. Some people have taxes that are more complex than others are. Some may have to seek a professional and some may have the luxury of filling out the 1040EZ form, depending on assets, such as owning a business. The whole process of having to file taxes can be very time consuming, stressful, costly, amongst other things. If the United States threw out their current tax code and replaced it with a flat tax for all that would save us time, money, stress, and having to learn a system that does not make sense to those who created it. Everyone including people who works or does not work pays their fair share of instead of just the working class American. Taxes are part of everyday life living in America. There comes the time of year that new years rolls around again after again and getting all of our paper work together including W2s, tax deductions, or 1099s. Gathering all of the paperwork to file taxes is burdensome and creates headaches. For some, it may but not knowing what form to fill out, waiting on all the...
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...Introduction Developing an alternative economically feasible tax collecting system which is fair and balanced to both businesses and citizens of the United States. The United States currently uses a progressive tax system, which is dependent on two important factors: income, which is a key component of the progressive taxation, depending on income of an individual. The tax rate increases for higher income earners and decreases for lower income earners. The other major factor in the progressive taxation system is expenditures. Expenditures are various sales takes that impose or collect revenue. The concept of expenditures is the more you spend, the more taxes you will pay thus increasing revenue within the progressive taxation system. The United States did not start with a progressive tax system but before the 16th Amendment was ratified in 1913, the United States had a flat tax. The United States tax code evolved through time, as far back as the 13 original colonies. The colonies back then were heavily taxed by Great Britain, so much so, that they rebelled against Great Britain in an act of the Boston Tea Party to effectively protest a tax which they had no input in and no representation by the government of Great Britain, this led to the Revolutionary War and the fight for independence. Through the early years that America collected taxes, America was virtually tax free due to the heavy handed taxation of Great Britain. “The new American government was understandably cautious...
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...Tax Reform Position Paper Taxes are necessary because they fund the services provided by government. Americans will pay trillions in taxes. Beyond funding government, the federal tax system has profound effects on the economy as a whole and on individual taxpayers, both for today and tomorrow. Taxes change people’s behavior and influence the economy by altering incentives to work, consume, save and invest. This affects economic growth and future income, therefore, future government revenues. In this paper I will highlight the pros and cons of flat tax, national sales tax, and the current tax system. Flat Tax Simplicity is considered a significant benefit of the flat tax system. One tax rate makes for easy calculation by the Internal Revenue Service (IRS) and straight forward payments from taxpayers. Because the flat tax taxes only one income, it is easier to understand and to report. The flat tax remains a popular idea in part because it eliminates double taxation. It eliminates the death tax, capital gains tax and taxation of savings and dividends. Fairness remains a popular feature of the flat tax. A taxpayer who makes $5000 pays the same tax rate as someone who earns $500,000. The taxpayer who makes more pays more taxes simply because their income is greater. It does not discriminate based on income; everyone pays the same percent. Some of the cons of the flat tax are that the system penalizes the low-income portion of the population. For example, if the...
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...Flat Tax Rate Eliminates Complicated System The first quarter of each year marks a period of turmoil and angst for many Americans as they race to complete the complicated forms of the current years’ federal income tax return. With more than 66,000 pages and 893 forms to choose from, the current Internal Revenue Service Code screams difficulty (Mitchell, 2005). Most politicians agree that changes are necessary; however there remains to be a major debate of ways to accomplish changes without stressing the economy. The department of treasury has compiled extensive research that has resulted in various options on various ways to reform our current system (Mitchell, 2005). A flat tax rate on income could be a solution to this issue and many have invested time in devising feasible plans. There are pros and cons to everything, but I believe the benefits would far outweigh the faults in light of our countries current economic situation. A flat tax, taxing everyone at the same rate, with basic deductions as well as no income tax burden for persons or families who make less than a specified amount during the year, would be fair. Most people feel the current system is unfair with its double taxation and varying tax brackets ranging anywhere from 10% to 33% of the adjusted gross income (“Congressional Budget Office”). The proposed 15% or 17% flat rate for all American would benefit everyone, considering in 2007 the overall average federal tax rate was 20.4 percent (“Congressional...
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