Federal Taxation Article Brief Essay

725 Words3 Pages
Arayawna Moore

ACCT 613- Federal Income Taxation

February 22, 2014

University of Maryland University College

Susan K. Duke

Issue: The Dynamic Effects of Personal and Corporate Income Tax Changes in the United States within the Labor Market

Rule: * Most corporate income is subject to a 35% statutory tax rate * Taxpayers with an ordinary income tax rate of 15% or less pay the 0% rate on dividends. Taxpayers in the 25%, 28%, 33%, and 35% tax brackets are subject to a 15% tax rate on dividends. * 26 U.S. Code § 861 - Income from sources within the United States * 26 U.S. Code § 3510 - Coordination of collection of domestic service employment taxes with collection of income taxes * 26
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It has also argued that growth can also be enhanced, by improving the design of individual taxes. In some cases, such as the reduction of corporate taxes and the top rate of personal income tax, it is unlikely that these growth-enhancing changes will help the recovery from the current crisis. At the same time, there are tax changes that appear to be bad for growth, such as reductions in sales taxes (particularly if they take the form of exemptions and reductions) and property taxes that would do little to speed recovery. The tax change that shows the most promise in terms of both increased growth and economic recovery is the reduction of income taxes of those on low incomes. This would stimulate demand, increase work incentives and reduce income inequality. The authors display that the dependence of both growth and tax policy on initial income help explain why it is difficult to isolate the effects of tax policy on growth.
The author’s analysis shows that changes in taxes have important consequences for the economy. This is important given the debate at that time on the efficacy of fiscal policy and on the possible consequences of the fiscal consolidation that is bound to subsequently take place. “The evidence they contributed in this article is supportive for (i) relatively large and immediate output effects following changes in tax rates (ii) tax multipliers that are larger than most estimates of government spending
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