Essay on Flat Tax

First off, there are many people who do not even know what a flat tax is. By definition, a flat tax is described as, “a very precisely defined and coherent tax structure: a combination of a cash-flow tax on business income and a tax on workers’ income, both levied at the same, single rate” (Keen 4). Now, this just means that every person and every business, no matter the income, would be taxed at the same rate. Realistically speaking, when people talk about taxes, it is a matter of who wins and who loses. If we decided to adopt a flat tax system, people of lower income families would be suffering, “Under the flat tax, low-income households would lose because they now pay no income tax and are eligible for a refundable EITC of up to $3,370” (Gale 155). With this being said, the families of higher income would actually be thriving of a system

The federal tax code has a level of complexity so great, that reforming it should be the one thing Republicans and Democrats can agree on. Instead, proposal after proposal calling for reform die in Congress. And there have been a lot of proposals. Arlen Specter (D-PA) put some form of a flat tax/tax reform proposal into Congress’s hands every year from 1995-2010. This is because, for the most part, the fight for reform always comes down to a two sided debate. One side wants to keep the current complex structure and the other sees no other alternative than blowing this current structure up and moving to a flat rate system. All of this brings me to the arguments for/against the flat rate tax system.

Property taxes in California have been a controversial issue for very many years. In mid 1978, approximately ⅔ of voters in California passed proposition 13. Before it had been passed, property taxes increased almost annually according to the assessed value of the property. In the 1970s, there was a remarkable growth in the real estate market and the value of homes rapidly went up. Property values were escalating substantially since assessors had to keep assessed values current. On the other hand, increments in the evaluated value were not made annually. Therefore, this led to a huge tax shock for homeowners after every few years.

Kathy and Brett Ouray were married in 1996. In 2014, they consider themselves completely estranged. Due to financial reasons they have decided to not get a divorce or live separately. They also do not have any legal documentation of separation and neither of them has lived outside the home for a significant amount of time. They currently reside together with their three children. They have decided that Brett has contributed more to the upkeep of their home and children than Kathy. They have also decided to file separately. Brett believes he is eligible to file for head-of-household.

Nothing will be taxed twice, eliminating some confusion from citizens. An overall flat tax based system will have more upsides than downsides. “With a flat tax, politicians would no longer be able to reward their cronies and contributors with loopholes and tax breaks” (“The Flat” 6). Corporate tax rates will be low, luring in business. With a severely reduced corporate tax rate, more and more companies will start coming to America, instead of American corporations and big businesses leaving the States to receive a low tax benefit.

Our current income tax system today is very complex, unfair, inhibits saving, investment and job creation, imposes a heavy burden on families, and weakens the integrity of the democratic process. It can't be fixed and must be replaced. The U.S. income tax code is a long and complex system. The income tax system is so complex; the IRS publishes 480 tax forms and 280 forms to explain the 480 forms. The IRS sends out eight billion pages of forms and instructions each year. The administrative costs of the tax system far exceed those borne directly by the IRS. Each year Americans devote 5.4 billion hours complying with the tax code, which is more time than it takes to build every car, truck, and van produced in the U.S.

"A revolutionary change in our tax system is fundamental to re-energizing the American economy and restoring the American dream" (Moore 1). Currently, there are two major plans being considered to try and fix the tax system in the United States. These two plans are the Flat Tax and the National Retail Sales Tax. "Both the Flat Tax and a National Sales Tax would replace today's discriminatory tax structure with a single low rate. Either plan would promote the kind of capital formation that America needs to boost workers' incomes and raise long-term economic growth" (Mitchell 1). This means that the flat tax would take away the savings from the government and pass them on to the citizens and businesses. By doing this, there would be a rise in long-term economic growth.

These range from an increase in labor supply to faster economic growth. Dr. Andreas Peichl wrote an article detailing the expected results of a flat tax system. He based his expectations upon the various countries that currently employ such a system. The increase in labor supply can be explained by following the economic law of supply, which states that the supply of a good will increase as the price increases. Thus, as taxes are lowered and families are able to bring home more income, more people are willing to search for work. By stimulating the job market, the economy as a whole will be stimulated, as more families will have greater expendable incomes. Another effect that a simpler tax code will have is that more Americans will be able to reap the full benefits of the tax code. By eliminating itemized deductions taxation becomes more equal. In a chart published by the Tax Foundation, of those making less than fifty-thousand dollars, only eighteen percent made use of itemized deductions. By simplifying the tax code the rate of compliance would increase.This is caused by the shrinking of the tax code from seventy-thousand pages down to at most ten. In addition to raising compliance, by simplifying the tax code, it becomes a more equal system of taxation, as each would pay the same marginal rate, however, due to the generous exemption there would be an inconsistency between the marginal and

The Armey-Shelby flat tax proposition follows each of these principles. For individuals, only the income from wages, salaries, and pensions are taxed, then generous personal and dependent exemptions are deducted. What is left after these deductions is

Before diving into the research for and against a flat income tax, we should first understand how this tax system would work if it were to be implemented. Theoretically, in a flat income tax system everyone earning an income would pay the same percentage of their income in taxes. So, as an example, we have two people; one person makes $50,000, and the other makes $100,000, and the flat income tax is at 10%. Under the tax system used in the example, person one would pay $5,000 in taxes, and person two would pay $10,000 in taxes, so the amount of taxes payed under this system is directly proportional to the amount of income earned. This means that it does not matter how much money a person makes, they will still pay 10% of their income in taxes. Now that we have a firm grasp of what a flat income tax would look like, we can dive into the research for and against the flat tax. In the article “Pros and Cons Related to Flat Tax,” Emilia Clipici wrote, “[the pros] of the flat tax are direct and convincing . . . the flat tax is simpler, more efficient and stimulates the economy” (Clipici, 2010, p. 43). With the simplicity of the flat tax system, people may be able to file their own taxes, so the flat tax system would take a lot of stress out of tax day. However,

The income tax system ensures a stable source of income for the government. Even at a 10% unemployment rate, the government will still make money out of the remaining 90% of the workforce. As long as the workers make money, the government will do too. Therefore, the government does not have to worry about where to get money even in an economic depression. However, this is a luxury that the government will not enjoy with a single federal taxation system. Gasoline prices and usage is affected by market trends and economic performance. At a single given time, consumption will be low. Its fluctuating price will keep affecting how much the government makes from a single gallon. Therefore, unlike the case with the income tax system, the government will not have a steady source of income. This will affect the economy and the wellbeing of the society (Nishiyama & Smetters, 2005).

Overall, a correct execution of a flat tax would produce social equality, profits and a growing economy. The major change it would bring about would be to simplify a convoluted system, with less procedure to go through as everyone pays a single rate, resulting in more people being inclined to pay and follow tax regulations. However, I conclude that the disadvantages end up outweighing these advantages. A look at history has shown that the general public would not be in favour of a flat rate of income tax as it heavily burdens the poor while favouring the rich. Many a time, this heavy discrimination results in a high exemption rate, the revenues of which may not be able to be compensated for through foreign investment, as such a rapidly spending economy such as the UK cannot necessarily be compared to those of Eastern Europe. This is aside from the fact that it would be extremely difficult and expensive to implement such a tax in such an economic environment. Therefore, the disadvantages are far greater than the

Abstract: India’s major tax reform is now realism. A comprehensive dual Goods and Services Tax (GST) has replaced the complex multiple indirect tax structure from 1st July 2017. Internationally, GST was first introduced in France and now more than 160 countries have further implemented GST/VAT in some form or other. In some countries, VAT is the substitute for GST, but conceptually it is a destination based tax levied on consumption of goods and services. Presently, only Canada has a dual GST model (somewhat similar to the Dual GST Model that India has implemented).Most of the countries, depending on their own socio-economic formation, have introduced National level GST or Dual GST, i.e.

The Goods and Services Tax (GST) is a vast concept that simplifies the giant tax structure by supporting and enhancing the economic growth of a country. GST is a comprehensive tax levy on manufacturing, sale and consumption of goods and services at a national level . The Goods and Services Tax Bill or GST Bill, also referred to as The Constitution (One Hundred and Twenty-Second Amendment) Bill, 2014, initiates a Value added Tax to be implemented on a national level in India. GST will be an indirect tax at all the stages of production to bring about uniformity in the system.

Direct as well as indirect taxes both form a major part of revenues to the Government. With India’s tax to GDP ratio just under 15% as reported by Moody’s, it is a sign of worry for an emerging market like India. One of the main reasons behind India’s poor performance is the presence of highly inefficient indirect tax structure.