...Progressive Tax vs. Flat Tax The United States economy, as known by all, is not in its best shape. One way in which the government gains money is by imposing taxes on people. There are many taxes that are placed on different things that everyone needs or already has. The United States uses a taxation system which is criticized by many. The system used in Progressive Tax; however, many people believe the system of Flat Tax, or Proportional Tax, should be the system that is used for taxing. In a Progressive Tax system, a larger percentage of income is taken from those who are wealthy or have a large annual income, in taxes. Those who have low incomes do not have as high tax percentage to pay because progressive tax is based on ability to pay. For example, with progressive tax, people with the lowest incomes will pay 10% in taxes, those with the largest incomes would pay about 30%, and the middle class would pay somewhere in the middle. Flat tax is another way to say proportional tax and a Flat Tax system is a system in which the same percentage of income is taken from everyone. This means that no matter how much of an annual income you make, whether it be $20,000 or $200,000, everyone pays the same amount in taxes. Some people favor Progressive Tax, and others prefer a Flat Tax system. Both systems have their disadvantages and advantages. A Progressive Tax system gives the idea that everything is fair because everyone pays according to how much they...
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...present 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...
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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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...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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...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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...that he couldn't understand why someone would take a tax course. Why is this a rather naive view? A clear understanding of the role of taxes in everyday decisions will help people make informed decisions about the value of studying taxation or pursuing a career. Once you know how taxes effect your money, you can better plan for future expenses, gifts, or investments. 2. What are some aspect of business that require knowledge of taxation? What are some aspects of personal finance that require knowledge of taxation? Taxes are significant costs that influence many basic business, investment, and personal decision. Business decisions: what organization form to take , where to locate, how to compensate employees, appropriate debt mix, owning vs. renting equipment and property, how to distribute profits, and so forth. Investment decisions: alternative methods for saving for education or retirement, and so forth. Personal finance decisions: evaluation job offers, gift or estate planning , owning vs. renting home, and so forth. 3. Describe some ways in which taxes affect the political process in the United States. 4. Courtney recently received a speeding ticket on her way to the university. Her fine was $200. Is this considered a tax? Why or why not? 5. Marlon and Latoya recently started building a house. They has to pay $300 to the county government for a building permit. Is the $300 payment a tax? Why or why not? 6. The city of Birmingham recently...
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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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...similar theme and represents a progressive state that is consistently moving forward. The Wisconsin school system also claims to have a proud history of progressive education. Wisconsin was granted statehood on May 29, 1848, becoming the 30th state. It was in this same year that Wisconsin first recognized public education, and began dialogue on ways to finance it. Wisconsin Constitution, Article X, Section 3 states that, “The legislature shall provide by law for the establishment of district schools, which shall be as nearly uniform as practicable.” Established school districts were handed the authority to govern the schooling in their region, and were given the power to tax in order to fund school development. According to Maher, Skidmore and Statz (2007) it was decided that the school districts should be funded through local property taxes, which presented further challenges. This created a heavy reliance on local property taxes, leading to frustration for taxpayers. The second major challenge was that all districts were different in size and demographic, therefore this created a disparity between districts in their ability to raise money through taxes. The state was forced to provide financial aid due to the inequity in dollars that could be raised between districts. The state set up financial aid, the Common School Fund or Library Aid. Maher et al. (2007) state that, “Initially, this support was provided to every school in the form of a flat amount of aid per pupil. This...
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...average rate at which an individual or corporation is taxed. The effective tax rate for individuals is the average rate at which their earned income is taxed. The effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed. An individual's effective tax rate is calculated by dividing total tax expense by taxable income. For corporations, the effective tax rate is computed by dividing total tax expenses by the firm's earnings before taxes. The effective tax rate is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income. The effective tax rate is often a more accurate representation of a taxpayer's tax liability than its marginal tax rate. Two companies that are in the same marginal tax bracket, for example, may end up with different effective tax rates depending on their earnings. This occurs particularly with a progressive, or tiered, tax system, where different levels of income are taxed at different rates. For example, the first $100,000 of income may be taxed at 10%, and income between $100,001 and $500,000 might be taxed at a rate of 15%. The corporation's income is taxed at the various levels, and to determine the effective (or average) tax rate, the total tax is divided by the total taxable income The term effective tax rate has different meanings in different contexts. Generally its calculation attempts to adjust a nominal tax rate to make it more meaningful. It may incorporate econometric, estimated...
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...Implementing Goods and Services Tax in Malaysia Lim Kim-Hwa Penang Institute & University of Cambridge limkimhwa@penanginstitute.org Ooi Pei Qi Penang Institute peiqi.ooi@penanginstitute.org 8 October 2013 Abstract External economic factors and Malaysia’s domestic fiscal position dictate that the Goods and Services Tax (GST) is likely to be introduced in the upcoming Budget 2014. In this paper, we: 1) assess if GST is a progressive or regressive tax; 2) study the impact of GST on Malaysian households; 3) estimate the total GST raised from households in perfect condition vs. practical circumstance; 4) estimate the expected inflation spike based on the Consumer Price Index; and 5) discuss the wider implications of implementing GST. Despite setting essential items like basic food, public transportation, education and healthcare as exempt or zero rated items, we show that GST is a regressive tax. Using 7% as the standard GST rate, the average household is expected to pay 2.93% of monthly income as GST (RM 104 per month in July 2013 values). Households will pay higher percentage of their income as GST if they are: middle and low income groups (with those earning around RM 2,500 per month paying 3.07%), engaged as technicians, clerical and services workers, farmers and fishermen, in single person household, in young households (less than 24 years old), Bumiputera-led households and households residing in Peninsular Malaysia. We find that it is not possible...
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...As recounted by Wanniski (associate editor of the Wall Street Journal at the time), in December of 1974 he had been invited to have dinner with me (then professor at the University of Chicago), Don Rumsfeld (chief of staff to President Gerald Ford) and Dick Cheney (Rumsfeld’s deputy and my former classmate at Yale) at the Two Continents Restaurant at the Washington Hotel in Washington, D.C. (just across the street from the Treasury). While discussing President Ford’s “WIN” (Whip Inflation Now) proposal for tax increases, I supposedly grabbed my napkin and a pen and sketched a curve on the napkin illustrating the trade off between tax rates and tax revenues. Wanniski named the trade off “The Laffer Curve.” I personally don’t remember the details of that evening we all spent together, but Wanniski’s version could well be true. I used the so-called Laffer Curve all the time in my classes and to anyone else who would listen to illustrate the trade off between tax rates and tax revenues. My only question on Wanniski’s version of the story concerns the fact that the restaurant used cloth napkins and my mother had raised me not to desecrate nice things. Ah well, that’s my story and I’m sticking to it. The Historical Origins of the Laffer Curve The Laffer Curve, by the way, was not invented by me; it has its origins way back in time. For example, the Muslim philosopher, Ibn Khaldun, wrote in his...
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...spending * Reasons: (1). Increased international tax competition>>联想：可能是公司都找到税收最低的国家创立空壳公司来合理避税>>different to collect income taxes>choose consumption to be the main source of revenue. (2). Move from tax on income to tax on consumption >>improve economic efficiency >>increase the rate of growth >>improve competitiveness >>protect employment 以上两项放到了political上 (1). Germany: increase VTA rate >>to finance a cut in social security contributions. (2). France: A proposal to increase VAT & reduce employers’ social security contributions Increase VTA 的问题 (1). Increase the inequity (2). Lower the living standards of the poor balance: between economic efficiency and income inequality. 2. 啥是taxes on consumption how to choose the balance between direct tax and indirect tax Question: why social security contributions can be even regressive (taking a higher proportion of lwer incomers.) 3. what are the trends in the OECD? (1). 观察VAT在1965-1975年之间在OECD的变化 average: decrease this change balanced by the increase of tax on income<<strong increase in the share of social security contributions. (2). The role VAT played in the development of consumption tax over the past 40 years. Figure 2: Revenue from general consumption taxes (and VAT in particular) has grown faster across the OECD as a whole that all taxes on consumption. Continuing increase in VAT vs historically downward trend in taxes on consumption...
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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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...x Chapter 1 Summary of End-of-Chapter Problem Revisions |2012 Edition |2011 Edition | | |Problem Number |Problem Number |2012 Edition Modifications | |1 |1 | | |2 |2 | | |3 |3 | | |4 |4 | | |5 |5 | | |6 |6 | | |7 |7 | | |8 |8 | | |9 |9 | ...
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...The City of Las Vegas, Nevada Budget Process Sarah Molda Missouri State University The City of Las Vegas, Nevada Budget Process In accordance with Nevada state Law, City governments in Nevada are created either by general law or special charter. The City of Las Vegas is a special charter city, and operates under a council-manager form of government as proscribed by Nevada Revised Statutes (NRS) Chapter 268, with our mayor elected at-large and six City Council members representing the 6 single member wards that represent the City. The vision of the City of Las Vegas is to be “a world-class, vibrant, affordable, economically and ethically diverse, progressive city where citizens feel safe, enjoy their neighborhoods and access their city government. Its mission is to provide residents, visitors and the business community with the highest quality municipal services in an efficient, courteous manner and to enhance the quality of life thorough planning and visionary leadership.” (City of Las Vegas) The Las Vegas city council oversees the general administration, makes policy, and sets budget. The council appoints a professional City Manager who is charged with the running day-to-day operations, with the City Managers office being responsible for the administration and operation of all municipal services for the City of Las Vegas as well as the oversight for all redevelopment and economic development. The City Manager's staff also tracks the progress of various projects,...
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