Taxes Essay Research Paper TaxesAn income tax — страница 2

Dependency Exemptions-__________3.Taxable Income __________4.Taxes Paid (multiply line 3 by 20%/17%) __________ Simplicity is only an ends to the means that Armey and others feel will benefit the American tax payers and the American government. Mainly, a flat tax would cut down on the cost of operating the Internal Revenue System (IRS) which has been estimated as tens of billions of dollars. The IRS still can’t account for approximately $120 billion in lost tax revenue due to underreporting of income and overstating of deductions or exemptions.vi With a flat tax there is little leeway with deductions and exemptions so the potential for lost revenue is lower. In addition, because of the simplicity of the filing process, people who may not have filed in the past may be inspired

to fill out the easier form. A flat tax, according to Christopher Farrel columnist for Business Week, would “eliminate the need for so many tax lawyers and accountants.” This new reform would also contain the potential for downsizing the IRS. It would also eliminate current spending on record keeping IRS audits, and tax preparation fees paid by tax payers.vii Many would argue that this is a much lower tax rate for the rich in this country. True indeed, but the idea behind this according to Armey is that with the freed up income, the rich will invest back into out economy. There is no doubt according to Michael ruby, Co-Editor of U.S. New & World Report, that taxes would fall for almost all households in the US. He is quick to point out that those households earning more

that $200,000 would pay significantly less than before the flat tax. Ruby believes thatThe fairness issue can be addressed by creating a second tax bracket as mentioned above. By using a two-bracket approach, the fairness issue can be addressed without sacrificing the simplicity to any great extent. To build on this, under Armey’s flat tax proposal, a family of four can make over $29,000 and still pay no taxes whereas now they may pay over $6,000 in taxes.ix Another advantage of the flat tax proposal is that people will have more money to spend on health care. The government may be able to lower spending with regards to Medicare and other programs such as Welfare and some child care programs. There is also strong evidence suggesting that reduced tax rates also have the

advantages of increasing the incentive to earn income, while lowing the incentive for taxpayers to find loopholes. Overall, the Flat Tax Proposal is a very intriguing proposal. There seem to be a lot of benefits that are coupled to it, but with any proposal, at this point there are still some loopholes associated with it. Of the current tax proposals, no one proposal has spurred as much discussion except perhaps a national sales tax. Companies such as H&R Block, accountants, and tax lawyers will be sure to find on capital hill lobbying against this new easy tax system. The outcome will be interesting to see. i Holcombe, Randall G. The New Grolier Multimedia Encyclopedia, Grolier ElectronicPublishing Inc. 1993 See. Income Taxii Michael Ruby. Three Cheers for a Flat Tax, U.S.

News & World Report. February 20, 1995pp. 76iii GOP Tax Proposals, INTERNET. Site-http://edf.www.media.mit.edu/taxintro.html SEE DickArmey’s Flat Tax Proposaliv Jeff A. Schnepper and Charles J. Santilli. Flat Tax Follies, USA Today. July 1992. pp. 27v Malcolm S. Forbes Jr. Fact and Comment: Specter of the Flat Tax, Forbes. March 27, 1995.pp. 27vi Christohper Farrell. A Jumble Only a Flat Tax Can Untangle, Business Week. January 9,1995. pp. 39vii Ibid. pp 39. viii Ruby, pp. 76ix Department of the Treasury, Internal Revenue Service. 1040NR Forms and Instructions.1995. pp.22