...A1) A parent is looking for the best option for daycare for a child. A home-based option charges a flat rate of $10 per hour. A center-based option charges a fixed fee of $332.50 per week for 35 hours and then a fixed rate of $11 per hour for any hour provided over the set amount. Determine which option is most advantageous for the parent based upon the parents’ needs. A2) The parent works a 40 hour work week. Each of the daycare options is a half an hour away from the parent’s office. This means that the child is there for a total of 45 hours a week. The parent has federal holidays (10 holidays in 2014), the day after Thanksgiving, and Christmas Eve off so there will be weeks that the child will not be in daycare for the full week. The parent also receives two weeks of vacation each year. Other situations to consider are that the child and/or parent could get sick or they could take a short vacation and the child will not have to attend the daycare for the full week. A3) If the parent chooses to go with the home-based option, the parent will be charged a flat rate of $10 per hour. This option gives the parent the freedom to either take the child to daycare or to not and only be charged for the hours the child is there. If the child is there for 45 hours a week, the parent will pay $450 for that week; if the child is there for only 20 hours a week, the parent will pay $200 for that week. If the parent chooses to go with the center-based option, the parent will be charged $332...
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...Income Taxes: Flat or Fixed Since President Abraham Lincoln introduced income taxes, it has been a profoundly discussed topic among the citizens. Americans have innumerable amount of beliefs and disagreements about how the tax brackets function and should function. A large number of Americans are pushing for a change in the way income tax system work. At the same time, many agree to keep the income tax brackets that separate the wealth classes. The controversy in connections with income taxes is ongoing. Is a flat rate income tax the most efficient for the United States government? Tax brackets have been around since the beginning of income taxes. Income taxes began with the passing of the sixteenth amendment. The sixteenth amendment states,...
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...Flat Tax Rate Memo To: From: Date: Re: Benefits/burdens of implementing a “Flat Tax” From the U.S. Federal Government to each individual taxpayer in America, everyone cares about how tax is being paid. In this memo, we will discuss the benefits and the burdens of implementing a “flat tax”. The current U.S. tax system is complex. IRS has six federal income tax brackets ranging from 10 to 35 percent. This progressive tax system punishes the most productive members of society with a higher tax rate. Some scholars, such as Dan Mitchell, argue that, “From an economic perspective, the flat tax and the national sales tax (or fair tax) are virtually identical. Both would junk the current system. Both would restore fairness by taxing at one low rate. Both would eliminate all forms of double taxation.” A flat tax is a single rate that spans all income brackets of taxpayers, rather than the current “progressive” system, which taxes higher-income individuals at increased rates and includes numerous deductions and exemptions. From the article Ramifications of a Flat Tax—Shifting the Burden to the Middle Class, the author states that, because many taxpayers believe the current tax system is not good enough, it needs to be changed. Therefore, the article introduces two flat tax systems to replace the current tax system, one is the Forbes’ Plan and another one is the Hall and Rabushka Plan. The models of these two plans are as follow: 1. Forbes Simulation Model Tax...
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...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 when it came to taxation – direct taxation was prevented by the Constitution for all practical purpose.” (Beattie, 2013) Most of the taxes back then collected by the government were...
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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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...Wipula 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 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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...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 administration, since 2008 Albania is applying the flat tax system. Previously Albania...
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...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 tax rate were 10 percent, then someone making $1,000 would have $900 spending income left after taxes. Someone who makes $10,000 is left with $9,000 after taxes; this inequity is thought to prove that a flat tax disproportionately benefits the rich. If the rich paid less tax, many believe that the government would lose significant revenue. A flat tax rate treats individuals and corporations...
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...Forum on Tax Reform Fundamental Tax Reform: An International Perspective Abstract - This paper examines trends in tax reforms. The analysis is limited to the experience of 30 OECD countries, and focuses particularly on changes since the year 2000. The paper analyses the general trend of reductions in both tax revenues and rates and the diversity in tax policies across OECD countries, reflecting the diversity in both economic circumstances and policy objectives. Developments in tax administration are also briefly dealt with. Some of the challenges for tax policymakers and administrators that are likely to arise over the next few years are identified, and possible alternative approaches to solving them are put forward. INTRODUCTION ax reform is an ongoing process, with tax policymakers and tax administrators continually adapting their tax systems to reflect changing economic, social and political circumstances. Over the last two decades, almost all Organisation for Economic Cooperation and Development (OECD) countries have undertaken structural changes to their tax system that have significantly altered the way these systems function and their economic and social impacts.1 In some countries (for example, many of the Eastern European economies in transition), the reforms have been profound and implemented over a very short period of time. In others (most of the European countries), the reforms have been a gradual process of adaptation, but over time they have substantially redesigned...
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...What is Taxation? Taxation defined in the Essentials of Jamaica Taxation, 3rd edition volume 1 state,’ it is a form or another which has been levied on citizens from ancient times.” Further reading also suggests that taxation is a compulsory contribution to state revenue, levied on individuals and businesses by the government. Taxes are deemed a necessity by its government in order to provide infrastructure such as roads, hospitals, welfare programs, national security, pensions and aid in the government’s legal and financial legislation. The Encyclopaedia Britannica states that the purpose of taxation is for Redistribution - transferring wealth from the richer section of society to the less fortunate, Repricing - which is tax imposed on goods and services that are considered hazardous to our health such as tobacco, bleaching products and alcohol; and Representation - which indicates that the citizens demand accountability from their government. Taxation Structure Seventeenth-century French statesman Jean-Baptiste Colbert expressed that “the art of taxation is the art of plucking the goose so as to get the largest possible amount of feathers with the least possible squealing.” Today’s economists have rather different ideas of what constitutes a good tax system. There is a popular belief that a tax system should follow two main principles: fairness and efficiency. Scottish economist Adam Smith laid out these principles in his landmark treatise The Wealth of...
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...Progressive taxation * A tax rate is progressive if it increases as the tax base increases. Tax rates increase with increases in taxable income. * Examples: Federal income tax Federal estate Gift taxes Currently, there are six rates ranging from 10 to 35 percent (as per our study material Chapter 1) Annual median income (defining the upper and lower one-half of citizens) is about $33,000. Income of more than $340,000 puts a taxpayer in the top 1 percent of filers, and effective Federal taxes for the top 10 percent of earners have increased faster than their incomes. The following table shows the share of Federal taxes paid by various income categories. Income Category Share of Total Income (%) Share of Federal Income Taxes Paid (%) Top 1% 17 37 Top 5% 32 59 Bottom 50% 13 02 If you see the table, we can see that Top 5% of the income category pays almost 59% of share of federal Income taxes. So the poor (i.e the 50%) contributes just 2% of the Taxes. I will mention this later in my discussion. (The above information has been gathered from our study material Chapter 1.) Advantages of progressive taxation * More Revenue: By using a progressive tax system, the gap between the rich and the poor will decrease slightly. Since the tax rate goes up for those who make more money, more money will go to the state. As I mentioned in earlier, the major portion of the taxes come from the Super Rich. Hence more their income, more...
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...The system of tax that a country chooses has a lot of effects on both its citizens and the economy as a whole. Most countries have adopted a progressive tax system, whereby they tax different classes of people different percentages of their wages. For example, the system might tax high-income earners, middle-income earners, and low-income earners at 30%, 15%, and 10% of their earnings respectively. Over time in the U.S and other major countries, some macroeconomics analysts have been proposing the replacement of the current progressive tax system with a flat tax system. Here, the household income will be taxed at a uniform rate, regardless of the level of income (Hall, & Rabushka, 2007). Hall claims that this system is of benefit to everyone,...
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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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...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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