Premium Essay

Fair Tax Reform

In: Other Topics

Submitted By zkzz
Words 2609
Pages 11
The Case for Fair Tax Reform The current economic situation of the United States can be blamed on a multitude of variables and is the fault of numerous politicians from both parties as well as an abundance of special interest groups with lobbying power, not to mention several Presidential administrations. This paper will not examine all of these variables or individuals; it will concentrate on the isolated issue of tax reform on the highest earners and how it negatively affects the federal deficit and income inequality inside of the United States. What this paper will prove is that if the United States does not raise taxes on the highest earners, history shows that the divide between rich and poor as well as the divide between surplus and deficit will only widen into the future. When President Ronald Reagan shrank the tax brackets in 1987, it was the beginning of a new economic era. The theory behind cutting taxes on the richest people was that with extra money, the most profitable companies and taxpayers would invest their extra capital into the market and in the process create more jobs, expanding the economy. This may not have been the catalyst for the service economy revolution but it certainly coincided with it. A significant amount of opportunity cost was invested into foreign markets creating a cheaper workforce abroad, while domestically shrinking the labor market. According to MIT professor James Poterba, income inequality began to increase after the 1986 tax reform. According to research done by Poterba and Daniel Feenberg
The adjusted gross income for individuals in the top one percent of American taxpayers increased dramatically after the 1986 tax reforms, where marginal tax rates dropped from fifty percent to twenty-eight on the highest earners. Poterba and Feenberg observe that the reason that income inequality widened during this period…...

Similar Documents

Premium Essay

The Fair Tax Act of 2013

...The Fair Tax Act of 2013 is an alternative tax plan introduced Senator Saxby Chambliss (R-Ga) to the Senate Finance Committee on January 23, 2013. Subsequently Senate bill S. 122 and House bill H.R.25 were written. The Congressional findings of the 113th Congress in regards to the Federal income tax, which prompted the introduction of this alternative tax plan, found that the present systems of federal taxation retards economic growth thus reducing the living standards of the United States citizens, impedes the International Competitiveness of Industry in the United States, lowers productivity, as well as a host of other negative findings attributed to our current Federal taxation scheme. Those that supported the introduction of this legislation have the belief that a consumption tax, which is the hallmark of the Fair Tax plan, would have a positive effect on savings and investment thus easing tax compliance resulting in an increase in economic growth and international competitiveness of American industries. Glen R. Hubbard wrote: “A shift from the current tax system to a broad-based consumption tax is best thought of as a two-step process”. His findings first conclude that most elements of consumption tax reform are consistent with moving to a pure income tax with uniform capital taxation. Once there, to get to a consumption tax the key element of reform would be the replacement of depreciation allowances for physical investment with expensing of capital assets. Both of......

Words: 2324 - Pages: 10

Premium Essay

Tax Reform

...Tax Reform Racket First and foremost let us begin by clarifying that we are by no means economists. However, we are United States taxpayers, and we know us as well as our neighbors are being robbed. For a better understanding of this let us look at a few areas that led to this. These areas include Article I section 8 of the U.S. Constitution, the U.S. Civil War, and the 16th Amendment. Article I section 8 of the U.S. Constitution authorizes the power, The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defense and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States. ("Constitution of the United States - Official") This is all well and good, however things start to get a little heated in America come 1861. Unfortunately we split and Civil War began and come 1862 America needed a way to finance a war against itself. Thus came the federal income tax, also know as the Revenue Act. Though the Civil war contributed to one of the greatest social victories of mankind it has led to the beginning to America’s loss of liberty. (Edwards) In April 1865 Uncle Sam Removed the chains of slavery in the U.S. on African Americans then in 1913 applied them to all Americans the 16th Amendment. Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without......

Words: 1570 - Pages: 7

Premium Essay

Fixing the Current Tax System

...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......

Words: 3688 - Pages: 15

Premium Essay

Taxation Speaker Write Up

...way to tax and the role the tax code should play in people’s lives. An Inconvenient tax depicts one of America’s messiest problems: a fundamentally broken tax code that affects us all. The documentary explores the history of income tax following it through wars, economic booms and presidential significance in US history. It also exposes the various ways Congress used the tax code to fulfill political goals opposed to raising revenue. In my opinion, the tax code should just raise revenue then try to do as little else as possible because almost everything else that it does is harmful to the people. Basically, the tax code is a monster and that the US is in desperate need of real tax reform, not like the limited tax reform back in 1986. Some solutions that could be assistance are a Fair Tax in which there are no exceptions to it. Any exception would make it unfair. Any change would be obvious because the taxed amounts are on the receipts of anything you buy. A flat tax would be the highly recommended solution that an average tax payer and many politicians would prefer. But of course, because of politicians, the flat tax would not actually stay “flat” for long and we’d end up with 2000+ pages to the tax code again. Another idea would be a popular European tax known as the VAT tax. Basically, it adds a little tax throughout the production process. But on the downside, it’s not as transparent as a flat or fair tax and would least likely to reduce the complexity of the tax code......

Words: 315 - Pages: 2

Premium Essay

Should America Have a Flat Tax

...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......

Words: 1832 - Pages: 8

Premium Essay

Communications

...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......

Words: 3108 - Pages: 13

Premium Essay

Donald Trump Presidential Campaign

...tremendous amount of success building his value. Trump is a conservative that offers conservative reforms through bold strategies in order to connect with constituents. His far-right position leaves room for discrepancies, like the other candidates also running for the 2016 Presidential Cabinet. Donald Trump is a conservative Republican supported by his impressive history to foster business across an array of fields. If he should go on to become the next president of the United States his proposal to reform regulations such as veteran affairs alongside a compelling tax reform may come to fruition. His positions are traditionally renewed, therefore making him appealing to the older, upper class American citizens who can merely stand the current ways presented by President Obama’s administration. According to Trump’s campaign website, he is opposed to the current state of the Department of Veterans Affair (VA). He offers his plan to reform it in three stages: First, to ensure our veterans get the care they need wherever and whenever they need it, second, to support the entire image of a veteran, and last, to make the VA great again(Donald Trump). In emphasizing to help restore the VA and expedite the process to fix it, Trump is reaching out to veterans in addition to the rest of his supporters. Another pressing regulation he’s spending a lot of time addressing is his Tax reform. His plan to get more Americans working and more jobs on American soil will help the middle......

Words: 1607 - Pages: 7

Premium Essay

Immigration Reform

...| Immigration Reform | Why it should be Approved | IMMIGRATION REFORM Immigration, the popular government topic we hear about every day, and are not nearly close to resolving. Immigration, immigration reform, amnesty, Dream Act, and the “Dreamers” are all popular news topics these days. Immigration reform should be the path way to citizenship for all illegal immigrants, providing work permits, helping stimulate money for the economy and help keep families together. Provding work permits in the US for illegal immigrants is a great benefit to them. In August of 2012 President Obama’s administration approved the Differed Action for Childhood Arrivals (DACA). “As of May 31, 2013, USCIS has accepted about 520,000 DACA applications. They have approved a little over 365,000 and denied 3,816 applications.” (Leiva, 2013) This was a major accomplishment for the Dreamers who in 2001 introduced the DREAM Act and was denied in several occasions. Although DACA is a temporary solution to immigration reform it’s a great step forward. The majority of the applicants are college graduates with Associates and Bachelor’s degrees who until now weren’t able to work in their graduate field. Even though some states have opposed President Obama’s order for DACA with restricting approved applicants with not being able to have a driver’s license they have overcome it with other means or moving to a DACA friendly state. Immigrants who got approved under the age of 30 are able to work......

Words: 1255 - Pages: 6

Premium Essay

Scandal

...After Conservatives flip the senate from those extremist democrats they must pass tax reform. Tax reform is the most important issue facing our troubled nation. It is a disgrace that hardworking Americans must pay thousands of dollars each year to the Treasury. The tax rate must be flat instead of the Marxist progressive rate. Progressive taxation is detrimental to economic growth and unfair to hardworking people. In addition to that the withholding system must end because it is plain wicked to steal our money straight from our paychecks without ever seeing the fruits of our labor. The flat tax must be low hovering around 5% at the highest. Everybody should pay the 5% by April 15th of the next year. Eliminating the withholding system would give us the ability to keep our fiscal house in order. The government should be able to maintain a budget for one year. We are capable enough to pay our fair share by the April 15th date. Our checks need to be sent straight to the Treasury. There is no need for the IRS. We do not need tax credits or deductions. All we need is a flat tax that anybody can figure out. All you need is a W-2 form that has your income listed. Eliminate taxation on capital gains and dividends along with the corporate tax. Corporations should not be punished for making a profit. Their employees will pay taxes at the personal level so they shouldn’t have to be double taxed. The only income that should be taxed is income from working a job no matter the amount...

Words: 351 - Pages: 2

Premium Essay

Reforming the U.S. Tax Code

...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......

Words: 1339 - Pages: 6

Premium Essay

Digital Tax Reforms

...of this paper is to argue the need for tax reforms specifically aimed at addressing global issues in an increasingly interconnected world where tax laws are not designed for the digital age. It highlights the issues faced by countries due to ‘Base Erosion Profit Shifting ‘. The emphasis is mainly on two taxes, namely, ‘Diverted Profit Tax’ and ‘Digital Goods and Service Tax’, which are recently mentioned in the Australian Budget 2015. Organisation for Economic Co-operation and Development’s (OECD) involvement to concrete changes to avoid Base Erosion Profit Shifting (BEPS) has been mentioned. UK’s ‘Google tax’ and the ‘Double Irish Dutch sandwich’ tax evading structure is explained in an effort to elucidate the steps taken by Australian Government to encounter issues similar to them. Facts are stated with regard to the current Australian economy meshing these two new taxes into the existing taxation system. A conclusion is drawn concisely assessing the enforcement of ‘Digital GST’ and ‘Diverted Profit’ taxes and their probable effects on the economy. 1. The need for comprehensive tax reform One of the prime ways of generating economic revenue is to improve the tax capabilities. A good tax system promotes sustainable growth, provides key platform for trade and investments and strengthens the accountability of government to their citizens. The growing complexity in business and technological advances has made it difficult for the existing tax system to keep in pace. Taxes were......

Words: 1248 - Pages: 5

Premium Essay

Mike Huckabee’s Fairtax Discusion

...Mike Huckabee’s FairTax “Is Mike Huckabee’s FairTax actually fair?” by Len Burman appeared in the May 28, 2015 issue about Mike Huckabee’s FairTax. In this article we know about presidential candidate Mike Huckabee proposed ‘FairTax’, a national retail sales tax that would replace all federal tax code. It is complicated for lower-income families. Len Burman tell us Mike Huckabee plans to create “prebates”, which untaxes people for their necessities. According to the statistics about “Consumer Expenditures as Share of Pre-tax Income, 2011”, people earning over $150,000 spend only of of their income, and the share continues to fall as income rise, but the low-and middle-income people spend all or most of their income. The design of sale tax exempts a large share of high-income households. If FairTax wants use prebate to protect lower-income households without adding to the deficit, then it must raise taxes on people in the middle. Also this article tells us a decade ago, president George W. Bush’s Tax Reform rejected the idea about considered a sale tax as a revenue-neutral replacement for the income tax, because after concluding they found out that the rates would have to be much higher than promised by the FairTax people. And it also caudated the tax would be very regressive. On the other hand, the Panel also found the defect of prebate would be extremely expensive, hard for taxpayers to manage, and complex for the IRS to administer. However, the FairTax advocates......

Words: 316 - Pages: 2

Free Essay

Maquiladoras

...Mexico Needed Strategies to Retain & Attract Maquiladoras In the past, challenges on the Mexican side for competitiveness in retaining the maquiladoras in the country have included high business taxes, pricey highway tolls and the need for energy reforms (Canas, Coronado & Gilmer, 2004). Also, the cost of labor and services and international competition have thwarted the ability of Mexico to retain maquilas. In this paper we see how Mexico’s ways of doing business, how the government and other factors influence the retention or attractiveness of maquilas and what Mexico, as a country, could do/continue to do in order to place itself in a more competitive place. In the early 2000s, the Mexican maquiladora industry slowed, losing in about sixteen months almost 278,000 jobs. Being that maquilas make up a major part of trade between Mexico and the United States, this was a huge hinder for the Mexican economy. According to a speaker at a 2003 conference pertaining to the downturn of maquilas in Mexico, there ae about 26,000 United States companies that “supply maquiladoras with machinery, raw materials and components” (Canas, Coronado & Gilmer, 2004). The effect that maquiladoras have had on areas such as the border have been positive, as laborers from the interior of Mexico migrate to areas in search of these job opportunities (Beck, 2012). However, as I mention below, violence in the northern area of Mexico has also hurt the availability of skilled workers, as they seek......

Words: 2062 - Pages: 9

Premium Essay

Health Care Reform

...Johnson HCA-255 February 21st, 2014 Prof: Deborah Conway Health Reform Why the Clinton Health Reform Plan never passed in the 1990”s Possibly the Clinton organization's utmost error was unwarranted determination. The strategy struggled instantaneously to protect worldwide insurance coverage, controlling the isolated coverage market, changing health care funding through a company requirement, regulate prices to planes imposed by a nationwide health panel, and change the provision system through managed care. In the least any one of these ideas alone was going to be difficult to achieve, and even though there is a practical validation for taking all of them on at one time, it would prove to be an administrative double-crossing task. Without a doubt, each element of the Clinton plan stimulated conflict (Joanathan Oberlander, 2007). The National Federation of Independent Business strongly was against the business obligation. The Health Insurance Association of America struggled against coverage guidelines and federally enforced price controls. Congressional Republicans criticized the whole design, including the health agreements, as being too much “big government.” The organization's hold on to the proficient opposition of health care system change separate well-insured, middle-class Americans (Joanathan Oberlander, 2007). The Clinton organization both overestimated the opposition and misjudged the support for reform. The organization did not organize any planned......

Words: 1509 - Pages: 7

Premium Essay

Smiths Canons

...I believe that the ultimate role and purpose of tax is to: 1. To provide revenue to finance necessary Government spending 2. Reduce the gap between the rich and poor through redistribution 3. Reduce consumption of demerit goods To act as an instrument to achieve the economic aims of Government To redistribute income on a socially acceptable basis To provide revenue to finance necessary government spending: This will include services for all the public and amongst other things this should include things like Transport, education, health, housing and benefits and environmental issues. The problem here however, is that some people may argue that they are paying for services that they do not use, for example some people would prefer to use a private medical clinic instead of a government one. The services in this area which are funded by tax payers need to mirror the needs of the majority of the population is order to be as fair as possible. The two main questions here are, what counts as necessary government spending and how much tax should people pay to contribute to this. Reduce the gap between the rich and the poor through redistribution: Progressive taxation can be used to reduce inequality in society. This helps certain individuals to never fall below a level of income that would deprive them of access to basic needs such as food, clothing, housing, education and health care. Reduce consumption of demerit goods Taxes can help to reduce the...

Words: 1312 - Pages: 6