The Tax System

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Introduction The income tax system in our country is cumbersome, complex, and not user friendly. There are many problems associated with our system and most of the country wants a reform to the tax system. Some simply want only changes to the existing system while others want a completely new design. There are a few different alternatives available to us all which have their upside and downside. The Subtraction Method Value Added tax is one system which will be discussed here as a result of its many benefits. There is a substantial amount of reasoning for wanting to change the current tax system. The AICPA notes four fundamental reasons for wanting to change the tax laws. First, they note that there is a significant amount of support for…show more content…
The VAT and national sales taxes are known as consumptions taxes. We are familiar with this concept because we already pay a lower sales tax. In concept this would be a much higher rate than current state sales taxes and replace the need for the income tax. We would therefore see higher paychecks but then have to pay more for the goods and services which we would receive. One of the key benefits of this method is its simplicity. However, there is a low chance of this being implemented since the government has stated that even at a 29% sales tax not enough revenue would be generated for the government to meet its financial goals. This would discourage spending and increase savings. Alternatively under the Shelby flat tax “individuals would pay a wage tax at a flat rate of 17 percent, after an initial tax rate of 19 percent for the first 2 years after implementation” (AICPA 2009). This alternative seems to have the most support among the nation currently. The Subtraction has a great deal of benefits to it and would be a fantastic way to simplify the current tax code while still collecting enough taxes for the government to operate. The Subtraction method taxes the difference between a business’s gross receipts and its purchases from other businesses. It then adjusts the tax base using deductions. It looks similar to a corporate income tax. The AICPA notes that there are many beneficial facets to

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