United States Taxation

Foundations in Economics

United States Taxation

Overview

Under our current tax system, created in 1913, Taxes were established to raise money for the government. Taxes are imposed on income, property, sales, imports, estates and gifts, as well as various fees by the federal, most states, and some local governments. The income tax, taxes individuals, companies, and just about every legal entity on the income it generates, (Weakonomics, 2009). Under our current system, the income tax allows for progressive taxation on the amount of money you make; so what this means, is the more money we make, the more money the government takes out in taxes.

Our current tax plan is very complicated, and considered unfair to the rich and favors the poor. With so many people unsatisfied with our current tax system, the government has considered a new tax plan; that may in the long run help the economy. The Fair Tax plan, is the proposed plan addressed to Congress and the people of the United States. The Fair tax act, was developed in 2003, which if implemented would eliminate all federal, personal, and corporate income taxes, gift, estate, capital gains, alternative minimum, social security, Medicare, and self-employment taxes, (Walby, 2009). The new tax plan would replace all mentioned above with a federal retail sales tax of 23 percent, and every person, rich or poor, would pay 17 percent of what’s left of their total annual income from all wages, salaries, and pensions, after subtracting a personal allowance, (Walby, 2007). So far, the fair tax plan seems to be pretty fair in nature, but as with anything, there are advantages and disadvantages to the fair tax plan.

Advantages of Fair Tax

Supporters of the fair tax plan agree on the new tax reform for several reasons; first, the fair tax plan is easier to understand, compared to our current system. This new plan breaks down every aspect of what will be paid, and how much will be paid. Second, this new plan is transparent,...