...No. 2060 August 7, 2007 The Estonian Economic Miracle The Honorable Mart Laar Estonia is a small country in Northern Europe on the Baltic Sea, at the crossroads of East and West, South and North. Samuel Huntington states that the Estonian border is a border of Western civilization, a border where civilizations clash.1 This has made Estonia interesting to historians but hard for people who live there. Throughout history, Estonians have had to fight for their freedom. In 1918, Estonia declared independence. It was occupied by the Soviet Union in 1940 during the Second World War. We fought the communist terror during the war but were defeated. As a result of the occupation, Estonia lost nearly 20 percent of its population. But we never gave up. When the 1980s offered us a new chance, we took advantage of it. Estonia became one of the first countries to pry open the cracks in the Soviet Empire. Finally, in 1991, after 50 years of occupation, Estonia became free again. We had freedom but little else. Estonia was destroyed during the period of communist rule. In 1939, Estonia’s living standards and way of life were more or less the same as neighboring Finland’s. Then Estonia lost its independence, but Finland, despite losing territory and population, succeeded in keeping its independence. Life under two different political systems created a huge disparity in the development of Finland and Estonia. People learned and worked hard on both sides of the Finnish Bay, but only the Finns...
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...Report No. PF / HT / 010707 / 238 Sharing “OUR ” Ta Hum-Tum x Sav 1st July’ 07 A fortnightly refresher on Personal Income Tax ing Ti ps with “YOU” Allowances A I. II. III. llowance is a fixed monetary amount paid by the employer to the employee (over and above basic salary) for meeting certain expenses, whether personal or for the performance of his duties. These allowances are generally taxable and are to be included in gross salary unless specific exemption is provided in respect of such allowance. For the purpose of tax treatment, we divide these allowances into 3 categories: Fully taxable cash allowances Partially exempt cash allowances Fully exempt cash allowances (vi) (iv) Overtime Allowance When an employee works for extra hours over and above his normal hours of duty, he is given overtime allowance as extra wages. It is fully taxable. (v) Fixed Medical Allowance Medical allowance is fully taxable even if some expenditure has actually been incurred for medical treatment of employee or family. Servant Allowance It is fully taxable whether or not servants have been employed by the employee. (vii) Other allowances There may be several other allowances like family allowance, project allowance, marriage allowance, education allowance, and holiday allowance etc. which are not covered under specifically exempt category, so are fully taxable. I. FULLY TAXABLE ALLOWANCES (i) Dearness Allowance As is clear by its name, this allowance is paid to compensate...
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...Capitalism and Freedom By: Milton Freidman In Milton Friedman’s book Capitalism and Freedom, Friedman presents his theory, which is the importance of a free economy that is, without government interference. He strongly believes the government should stay out of anything to do with the economy. Friedman is under the impression that any government that is not the most basic government is bad. He thinks that it is important to let the invisible hand do its job and that by interfering with the natural process the system will get messed up. He introduces some radical ideas such as non-licensed doctors and school vouchers. Friedman was under the impression that if doctors were not required to obtain licenses, a better breed of doctors would come along. He thinks that by allowing the modern doctors to dictate whom the future doctors will be the competition for better doctors is impaired. By putting guidelines on who can practice medicine the system is creating the same level of doctor consistency. Friedman disagrees with this process because he sees competition a driving force that makes people to be the best they can be. Therefore, by making want-to-be doctors conform to a certain mold, the cycle of survival of the fittest is ruined. No better doctors or forms of practicing medicine will come along if this process is stunted. Friedman is also for school vouchers. This system of vouchers is the idea of the government giving parents a certain amount of money to spend on their children’s...
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...in America. This not so white elephant has dominated American news stations, but nonetheless has not been resolved. There is without a doubt financial inequality in America, and the main problems with this financial inequality are the flawed educational system where rich dumb kids have a much better chance to graduate college than a hard working poor kid, and the increasingly large gap between the rich and the poor. The cause for the problem of unequal opportunity in schooling is inherently the quality of instructors and schools across the nation, and the cause for the overwhelming rift between social classes is a flawed tax system which punishes success and benefits the poor. Furthermore, the solutions for these two massive problems would be to reform the American educational system to a performance based system and a reformed tax system that broadens the tax base and encourages success. Certainly, the level of financial inequality is an issue. But, why is it such an issue? One of the major underlying problems with financial inequality is the face that rich dumb kids that maybe be in the bottom twenty-five percent of their school but come from families that are in the top twenty-five percent of the socio-economic spectrum have a significantly higher chance of finishing college than students that are in the top twenty-five percent of their school but come from families that are in the bottom twenty-five percent of the socio-economic spectrum (Krugman 327). The reason that this...
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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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...Is it Time for a Flat Tax? Flat tax is defined as an income tax system in which everyone pays the same tax rate no matter his or her income. In 1913, the United States established an income tax to raise money for the government. In our current system, income tax is applied to various parties. Individuals, companies, corporations, an almost every entity that produces an income gets taxed. However, partnerships are not taxed. To calculate the taxable income, allowable deductions are subtracted from the total income. There are specific rules and guidelines for income taxation depending on the person or entity filing. For example, someone with a higher income is going to be taxed at a higher rate than someone with a lower income. Taxpayers generally self assess their income tax by filing tax returns to the IRS. Currently, filing for income tax requires, lengthy instructions, record, keeping, forms, worksheets and schedules. With all these necessities, it causes headaches for the taxpayers involved. This also does not include Social security taxes and Medicare taxes, which just keep adding to the money the filer has to pay and the costs that it takes to have an individual calculate everything to get to the gross income. One may ask how do we get rid of the headaches while still maintaining the income level for the United States government? One idea is establishing a flat tax rate for everyone. A flat tax is an income tax rate that everyone pays the same tax percentage across...
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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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...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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...Padgett Paper Products Case Study Solution Case Solution Outline -Summary -Problem Statement -Company -Market -Product -Projections -Options -Current Capital Structure -Proposed Capital Structure -Review Summary Objective: To find a mutually acceptable debt structure that will minimize lender risk while increasing company value. Constraints: 1) realistic cash flow projections, 2) Bank safety levels Situation for each Business Group Bank: Over extended and is in a bad situation. Lending exceeds reasonable levels and is not collateralized or subject to covenants. An $8 million loan is abnormal for the bank. The company’s management does not appear to understand the unrealistic debt situation, the impact on firm value and impact on the upcoming audit report. Management: Has unrealistic expectations and a lack of understanding of impact of current structure of firm value. Company: The Company has considerable levels of equity and is not maximizing its financial structure. It is capable of taking on considerably more debt, however, the debt needs to be more appropriately structured. Ownership: Closely-held company with owner having little interest in management. Owned for dividend distribution. Problem Statement: Because of inflation and an acquisition, Padgett's financial needs have risen to a permanent level rather than being merely seasonal in nature. Management at the company's bank must revise Padgett's debt structure in a mutually satisfactory...
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...“A flat tax is a tax system, which refers to a tax on household income, taxes at a uniform rate, regardless of income level”, but “the US currently implements a progressive tax system, where high-income earners pay taxes at a higher rate than low-income earners”. I am strongly for a flat tax rate for personal taxes but against it for corporate taxes. I am “pro” flat personal taxes because American workers should be able to keep their life-long and hard earned money. You simply should not be punished for working harder and making more. Flat tax is simple, transparent and fair and it would help fix the loopholes in the US’s current tax system. A progressive tax rate punishes those who have income earned and saved. A flat tax rate makes filing and paying taxes easy for taxpayers and for the IRS in their tax calculations. A flat tax also eliminates the burden of double taxation for situations such as interest and dividends etc. A flat tax would also eliminate many filing loopholes and lead to a greater tax revenues overall. Furthermore, a flat tax rate encourages growth and job creation, as it is a sign of financial stability in the economy. People will not be afraid to achieve and, in turn, earn more because they will be taxed greater on it. A flat tax would make it simple to save and to invest. Finally, I believe it is important to understand that I am actually against a flat tax for corporations because large and profit making companies are taxed essentially nothing. This is...
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...having an increased income because of his or her fear of being placed in a higher tax bracket and therefore paying higher tax payments is the wrong mindset for them and anyone else to have. Having that kind of mindset lets me know that they have been given misleading information on how our tax system works here in the United States, and as I stated earlier, it is essential that we first and foremost understand taxes in order to make important financial decisions. It would be understandable for...
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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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...Communication Plan Offering retirement benefits to employees to provide a source of income after they retire. Employees need to invest in their own retirement while working to ensure they have enough money to cover their expenses. The benefits of participating in these plans is tax-deferred earnings, and in some cases contributions are also taxed deferred. Employees can also invest in individual retirement accounts (IRAs) to augment their companies plan or to develop their own plan. "Companies establish retirement or pension plans following one of three design configurations: a defined benefit plan, a defined contribution plan, or hybrid plans that combine features of traditional defined benefit and defined contribution plans" (Martocchio, pg 259, 2009). Once the company decides on a plan, they need to develop a communication plan to encourage employee participation for the proposed retirement plan. "Setting up an employee retirement plan can be a smart way to provide for one of your key assets - your people - as well as benefiting one's business"("Nationwide", 2013). Providing a quality retirement plan helps attract and retain employees, reduce the tax burden and allows the owner to invest in their own retirement. Employers take care of their employees through salary, health care, paid vacation, sick leave. Companies who offer retirement plan greatly enhance their benefits package. "Employees are encouraged to save for retirement through plans...
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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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...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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