Assignment 2: Enacting New Taxes

M1 Assignment 2 Discussion 

 Due February 10 at 11:59 PM

Assignment 2: Enacting New Taxes

Decisions related to taxes have a far-reaching impact on all U.S. citizens. Therefore, it is important to weigh the pros and cons of such decisions and ensure that they will be beneficial to the majority of citizens.

Based on your readings for the module, respond to the following:

* When the government considers enacting a new tax, what issues need to be considered to ensure that the tax will be fair to all taxpayers?

Give reasons and examples to support your answer.

* Consider the idea of replacing the federal income tax with a national sales tax or value-added tax. Do you think this would make the system more fair or less fair? 

Give reasons and examples to support your answer.

Write your initial response in one to two paragraphs.

By the due date assigned submit your response to the appropriate Discussion Area. Use the same Discussion Area to comment on your classmates’ submissions and continue the discussion until through the end of the module. Comment on how your classmates would address differing views.

Discussion Grading Table

Maximum Points

Quality of initial posting, including fulfillment of assignment instructions 16

Quality of responses to classmates 12

Frequency of responses to classmates 4

Reference to supporting readings and other materials 4

Language and grammar 4

Total: 40

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EnactingNew Taxes

M1A2

Christopher Copenhaver posted Feb 10, 2018 6:53 PM

Enacting New Taxes

Taxes are imposed to raise revenue to the government. The tax system is imposed in a way that will ensure fairness to all targeted people, if not, it would be met with resistance. For the United States government to come up with an effective new tax that will meet their objectives, the government should consider the following factors: For one, the distribution of the tax burden. The tax burden should be evenly distributed between the wealthy and the poor. Wealthy citizens are most of the time better off economically as opposed to the citizens that are poor. With that being said, it will ensure fairness and equality and that the tax should be based on rates.

 

What I mean by this is, if a person makes $100,000.00 a month and another one makes $20,000.00 a month, it would not be fair to take a tax of $5,000.00 from both. The fairness would be to apply a 5% tax on both people.

 

Even though the wealthy will pay a higher tax opposed to the poorer person, the burden of equality would be satisfied, and it would be evenly distributed between the two people. Another factor to ponder on is the expected tax revenue. Before the government can impose any tax, they first should consider the amount of money they want to collect from the exercise. There is no reason to deprive the citizens of a lot of money inform of tax that would be kept in an idle state at the treasury, whereas the same money could have been used by the citizens in helping develop their individual lives. The last factor that should be considered in the implementation of the tax. The tax should be transparent, open and easy to understand.  This way individuals do not face tax penalties due to delays in their payments. All information including fines, penalties, and any other tax mishaps should be communicated to the people so that they know and understand. Also, the levels of the income tax play a key role in the guaranteeing of fair taxation. An example of this would be, people who earn a certain amount of income, shall we say below $18,000.00 a year should not be taxed. From that amount on up, the government can use a graduating scale, to ensure taxes are paid in respect to the level of income a person makes.

Federal income tax refers to the taxable income; employment earnings or capital gains earned by individuals, corporations, trusts, as well as other legal entities within the state. I did not agree with the idea of replacing such tax with the national sales tax or value added tax. This is based on the fact that, national sales tax or value added tax does not guarantee fairness and equity, both the wealthy and the poor end up paying the same amount of tax. Replacing the federal income tax with national sales tax or value added tax will make the taxation system less fair. Federal income tax is based on the levels of the people’s income, in that, each level of income has its own tax rate. This helps in ensuring that equal distribution of income between the wealthy and the poor, which guarantees equality and fairness, and therefore, should not be replaced with a less fair tax.

 

Reference

s:

Federal Income Tax, retrieved February 10, 2018 from;

https://www.investopedia.com/terms/f/federal_income_tax.asp

How FAIR tax Works; retrieved February 10, 2018 from;

https://fairtax.org/about/how-fairtax works

ROBERSON, YVETTE M1 A2 Discussion

Yvette Roberson posted Feb 8, 2018 11:34 AM

                                                                                                                                                                         M1 A2 Discussion

 

 Enacting New Taxes

When the government considers enacting a new tax, what issues need to be considered to ensure that the tax will be fair to all taxpayers? Give reasons and examples to support your answer.

Because no one lives in isolation, tax dollars from a variety of sources benefit you, your family and your neighbors, no matter the size of income. Every time you get into your car and travel on a public highway, you ride on roads built, maintained, and paid for by state and local road funds replenished by tax dollars. Children who attend public schools benefit from 47% of tax dollars collected. When your children receive adequate educations in well-funded school systems, your own quality of life is improved and so is your community, your state and your country. Tax dollars also pay for public safety for your neighborhood. Seven per cent of tax dollars fund police and other law-enforcement units. Twenty per cent of tax dollars help families through the work of the Department of Health and Human Services. Finally, your county or local municipality has a share in 40% of the gross receipts taxes collected by the state and distributed to local and county governments.

 

Consider the idea of replacing the federal income tax with a national sales tax or value-added tax. Do you think this would make the system more fair or less fair? Give reasons and examples to support your answer.

There are a lot of apparent benefits to such a change, such as the effect on income and it is important to note, however, that not all consumers would be affected equally by these changes.

More fair: Because income would no longer be taxed under a national sales tax system like Fair Tax, the incentives to work would change, causing a changes in the spending patterns, and helping those people who are inclined to save. A consumption tax can be avoided by not consuming. So, it makes sense that people who do not consume a lot will benefit from the plan. If households are classified by consumption level, a somewhat different pattern emerges. People who can shop in other countries. This group includes people who take a lot of overseas vacations and Americans living near either the Canadian or Mexican border who can do their shopping in those countries to avoid American sales taxes. People who own businesses. The sales tax will only be charged on goods bought by individuals, not by firms. Owning a business would give an individual an advantage as goods could be purchased free of sales tax if they are claimed as business expenses. The wealthiest one percent. As stated previously, this group would likely see an average tax cut of $75,000 per person.

Less fair: Seniors, do not earn income at a steady rate during their lifetime. The bulk of most people’s earnings occurs before the age of 65. People over the age of 65 have vastly reduced incomes and typically live off the savings they earned while employed in addition to programs like Social Security. A switch to a national sales tax would, in effect, result in taxing much of that money twice. These individuals would have already paid a lifetime of income taxes and would now be living off a mix of previously taxed and tax-deferred savings. Under a new national sales tax system, the previously taxed savings would essentially be subject to tax again when used for purchases. Unless special consideration is given to the current generation of seniors, they would end up paying a disproportionate share of taxes. Generally, under the current system, the working poor pay very little (if any) income tax. But everyone needs to consume to survive. The poor would get hit twice under such a scheme. While currently the poor pay very little tax, under the new system they would have to pay taxes on their consumption, so their total tax bill would rise dramatically. The poor also spend a larger proportion of their total income on consumption goods to survive, so they would ultimately pay a larger percentage of their income in taxes than wealthier individuals. Enactment of a broad-based, flat-rate consumption tax like the sales tax, would hurt families with incomes less than $200,000, because of the loss of tax preferences, but would help families with income above $200,000, due to the dramatic reduction in the top tax rate.

Reference

Moffatt, M. (29, June 2017), Can a National Sales Tax Replace Income Taxes in the U.S. Retrieved February 2018 from

https://www.thoughtco.com/intro-to-the-fair-tax-act-of-2003-1146360

 

Who benefits when taxes are collected, (N.D.). Retrieved February 2018 from

http://www.tax.newmexico.gov/who-benefits-when-taxes-are-collected-.aspx