Do you feel eliminating the income tax
PUA 5305, Public Finance and Budgeting 1 Cou rse Learning Outcomes for Unit VIII Upon completion of this unit, students should be able to: 5. Evaluate a model budget. 5.1 Analyze trends in taxation and how they can affect public budgeting. 8. Apply practical methods to reconstructing finance and budgeting techniques. 8.1 Summarize financial policy trends toward new alternative taxes. Re quired Unit Resources Chapter 16 : Taxes on Consumption and Sales Chapter 17 : Taxes on W ealth, Property, and Estates In order to access the following resource, click the link below. The Reason Foundation. (2017). Flat tax (Segment 1 of 10) [Video Segment] . Retrieved from https://libraryresources.columbiasouthern.edu/login?auth=CAS&url=https://fod.infobase.com/PortalPl aylists.aspx?wID=273866&xtid=114068&loid=454756 The transcript for this video can be found by clicking the “Transcrip t” tab to the right of the video in the Films on Demand database. Unit Lesson Domestically and internationally, officials use various taxing regimens. In previous units, we discussed taxation and the impacts of multiple tax structures as well as major tax reform policies. This unit provides a review of trends and alternatives in taxation and how th ey can affect public budgeting. Payment of taxes, whether they are local, state, or federal, gives public officials the neces sary funding to appropriate to various programs, agencies, or public offices as indicated in a previous unit. Selected taxes are compulsory on both individuals and corporations. Others are levied only on employers. Governing authorities from city, state, o r federal government regulate the am ount and form of taxes imposed. Sales and income tax es are major source s of revenue for state and local government (Hyman, 2014). A sales tax is a specified percentage of the price of a good or service charged during pu rchases or calculated on the basis of the unit of merchandise. Similarly, income tax is a percentage based on earnings. Taxes can be evaluated in terms of their effect on the distribution of income. Some experts assert that income tax is a superior index based on the ability to pay (Hyman, 2014). Conventional wisdom suggests that the advantages of income tax include fairness and equity. Income tax is viewed as a tool that controls behavior. Experts agree that income tax has a negative impact on savings. A second disadvantage of income tax is that it causes inefficiency and disincentive to work. However, consumption tax, or indirect tax, is an alternative to income tax. The consumption tax encourages economic growth through saving. This tax is purported to be more efficient economically, and it increases incentives to work (Hyman, 2014). Supporters of consumption tax argue that it provides a compatible index of the capacity to pay, similar to sales. In addition, the consumption tax is more favorable to savin gs and investment incentives than income tax (Hyman, 2014). UNIT VIII STUDY GUIDE Trends in Taxation: Consu mption Tax, the New Alternative PUA 5305, Public Finance and Budgeting 2 UNIT x STUDY GUIDE Title The federal government applies a consumption tax through the portal of an excise tax. The federal government levies excise taxes on commodities such as cigarettes, gasoline, tires, telephone communication, income, and alcoholic beverages. State government applies excise taxes to commodities such as fuels, tobacco products, alcoholic beverages, and other items. The economic recession, state and local government budget shortfalls, declining tax base, unfunded mandates, increased demand for public services, and municipal bankruptcies are just a few of the catalysts that contribute to governments trending toward tax reform. Officials have begun to sense and recognize that citizens are experiencing excess tax burdens. Therefore, numerous state governments have adopted legislation that promotes lowering taxes, hoping to provide taxpayers some relief. Trends in creating new policies seek to reduce income tax rates as well as the rates of other taxes a pplicable to individuals, corporations, or both. Officials are also hoping the new policies will stimulate paths for new economic growth and revenue. Consumption tax alternatives can include a flat -rate tax, sales tax, and/or a value added tax (VAT) (Hyman , 2014). Georgia implemented a change in its traditional tax system to a flat tax of 12% for personal income taxes (Torosyan & Filer, 2014). A flat tax does fluctuate based on the amount of income earned. In conjunction with implementing a flat tax, polic y for enforcement of tax collection was strengthened. Before tax reform, Georgia had more than 20 tax rates (Torosyan & Filer, 2014). After reform, the number of rates were reduced to seven (Torosyan & Filer, 2014). Citizens experienced the most notable ch ange in personal income and social insurance taxes. Reform efforts eliminated privileges and special tax rates for the wealthy (Torosyan & Filer, 2014). The new policies were accompanied with updated administrative procedures for tax collection as well as for monitoring compliance. Proponents of the tax argued that an excess tax burden was eliminated. In contrast, opponents argued that a consumption tax would create a perfect storm of bad tax policy.