Government, Politics, And Economics

The current tax policy in the United States is very confusing and it is very costly for our government to administer it. It is in the best interest of our country and its citizens to revise or replace our current tax policy.

Throughout the entire existence of any form of government, there has always been taxes. Most of the time (if not all), people hate taxes. With this being said, the United States has adopted a progressive tax since its very existence. We believe that if our nation is placed under a flat tax system, our economy will operate more effectively. If we incorporate a flat tax system we will be able to ensure fairness among all citizens, eliminate tax loopholes, and allow opportunities for business expansion. With this being said, we will be examining the strengths and weaknesses about the flat tax system and how it has been used into practice.

In the United States, the top one percent received about 20 percent of the overall income for 2016. This creates an uneven distribution of income causing Americans to argue about whether or not the wealthy should pay more in federal income taxes. One side of the argument is that the wealthy make a huge portion of the nation’s income; therefore, they should have higher tax rates. The other side argues that wealthy Americans already pay their fair share of taxes by paying nearly 40 percent and should not be forced to pay more. These arguments both use compelling evidence to make their claims; however, a solution could be reached by increasing the tax rate of the top one percent by only 10 to 20 percent.

People do not enjoy talking about taxes because they are too political, confusing, and depressing. It is no secret that the American tax code is a mess and something many economists describe as too broken to fix. Despite this, politicians have never stopped from trying to “fix” the code, yet they have had very little success. The U.S. Government’s tax code currently comprises “more than 67,000 pages of complexities” (Boortz, Linder, & Woodall 14). The Americans for Fair Taxation (AFFT) was founded in 1995 with one goal: create the simplest and best tax reform plan that would work in the modern market and economy. The AFFT’s best solution was a bill which they promptly called the FairTax.

The current tax code for the United States is almost 74,000 pages long. Or to put that into a different light: About 116 copies of Herman Melville’s Moby Dick. It is small wonder that a few of the announced candidates for President of the United States, have again begun to kick the tires on the topic of a Flat Tax. But is a flat tax actually a solution to our country’s growing tax complexity? What are the potential economic effects of a flat tax (both positive and negative)? Finally, is a flat tax even a viable solution? In short, will it work? As a concept, a flat tax is spectacular. Simplicity at its finest. As a fiscal policy, I believe that same simplicity must be examined and inspected closely.

The first proposal to impose an income tax on Americans occurred during the War of 1812. After two years of war, the federal government had accumulated a whopping $100 million of debt. To fund the war against Britain, the government doubled the rates of its major source of revenue, customs duties on imports, which obstructed trade and ended up yielding less revenue than the previous lower rates. At the height of the war, excise taxes were imposed on goods and commodities, housing, slaves and land were taxed. Finally when the war ended in 1816, these taxes were abolished. A high tariff was then passed to retire the accumulated war debt. Thankfully, the notion of an income tax was conquered (Young, 2004). However, the thought of the income tax reappeared as an idea to fund the Union armies in the war to prevent the secession of the Confederacy. The war was expensive, costing on average $1,750,000 a day. Struggling to meet these expenses, the Republican Congress borrowed heavily, doubled tariff rates, sold off public lands, imposed a maze of licensing fees, increased old excise tax rates and created new excise taxes. But none of this was enough to fund the debt (Young, 2004)..

The tax policy in the United States is very confusing. When the tax policy was originally written in 1913 it was four hundred pages. Now, over the past ninety one years, that tax policy has evolved to over 72,000 pages. Since the tax code has become so lengthy and nearly impossible to understand, the topic of tax reform has been in the minds of many. Although, most barely think about tax reform until tax season. It is a controversial subject due to the impact a change in tax code would have on the American people. The two most popular and widely known stakeholders in this debate are the two major political parties in the United States, the Democrats and the Republicans. The two parties share absolutely no common ground on the subject of

1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision?

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.

WK 7 DQ: The U. S. and the World economy is still in a period of slow growth and high unemployment. Soon, we will be in another election year, does the Political Business Cycle still exist?

"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.

While those making near the median income of $51,939 per year fall into the 25% tax bracket, taxpayers making over $413,200 per year pay 39.6% of their income to the government. Though heavily taxing the wealthy may seem to offer a solution to the ongoing economic woes, it has quite the opposite effect. For instance, many of the citizens who have a yearly income of over $413,200 own small and medium-sized businesses, which comprise a crucial part of our nation's economy. Because these private business owners are burdened by such high tax rates, they often have to pay their employees less and refrain from creating new jobs. Even more importantly, progressive taxation undermines the very fundamentals upon which the United States of America was founded by attempting to redistribute wealth through socialism. Our current tax system effectively strips individuals of their incentive to pursue entrepreneurship and positive economic development. In his first inaugural address, Thomas Jefferson stated, “A wise and frugal government… shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.” I am utterly disgusted at the way our government has blatantly disregarded the tenets of

The supporters of the Flat Tax system are quick to point out this system's attributes but not as quickly as the criticisms by those who oppose it. The filing of taxes each year would be much easier because there would be one set rate to pay. This type of system also discourages, and makes it almost impossible, to find and use any existing schemes that are present to avoid paying taxes. However, because there is a set rate at which everyone needs to pay, this system is quite unfair. Those who earn and have a lot of money should not pay the same amount as someone who has only a fraction of their wealth. The wealthier you are, the more you should pay because you can afford it. If there is a set tax rate it would be too high to some people and pocket change to others. A system like this also takes away many, if not all tax deductions. An event like this would cause irreparable injury to the middle class, who often times rely heavily on money they will get back from tax deductions.

Policy makers have introduced a solution to the staggering proportion of taxes that Americans spend. The flat tax, based on an idea developed by Professors Robert Hall and Alvin Rabushka of Stanford University to create a fair, simple, and pro-growth tax system (Mitchell 1, 11). There are four basic criteria that make up a flat tax. First is a single low rate on taxable income, the baseline for taxable income would be raised to a certain amount dictated by a personal exemption. Second is simplicity, all Americans would fill out the same postcard-sized form to pay their taxes. Third is the reduction or elimination of deductions, credits, and exemptions, depending

1986 was a pivotal year for the political economy of North America. During that year, some significant events took place that resulted to the beginning of a new era. In Mexico, a new political leader exerted the country towards entering the General Agreement on Tariffs and Trade. Mexico made an alliance with the United States that would ultimately create a free trade zone stretching from Central America all the way to the North Pole. Rather than incorporating the movement of workers of North America into the alliance, the United States insisted on controlling its borders unilaterally in order to prevent the integration of its labor markets. This event lead to Congress passing the Immigration Reform and Control Act. Many of the immigrants entered America in search for work and a better life. As the immigration population increased, American citizens began to worry about the economy and their jobs, safety, and their health.