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Essay Subject: Examines pros & cons of fairness & effectiveness of two consumption-based reforms to correct deficiences & injustices in tax system.... More...

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Paper Abstract: Examines pros & cons of fairness & effectiveness of two consumption-based reforms to correct deficiences & injustices in tax system. Paper Introduction: PROS AND CONS OF FLAT TAXES AND SALES TAXES This research paper examines the potential advantages and disadvantages from a public policy standpoint of various types of consumption-based taxes which have been proposed to remedy the deficiencies of the current federal tax system. A flat tax, rigorously applied, would be far superior to the present system because it would be simpler, fairer, a more efficient way of collecting public revenues and consistent with optimizing economic growth. However, it would benefit disproportionately higher income individual taxpayers, certain property owners and business generally and impose crushing burdens on lower income and many middle income taxpayers who depend on personal services income for maintaining their way of life and who consume most of Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. to remedy the deficienciesof the current federal tax system withoptimizing economic growth However it would way of life and who consume most of inequities in the tax code easier to collect as a flat last several years a great many of tax exemptions and deductions favored therich percent with exemptions for everything under the sun it are in the hundreds ofbillion dollar range Financial writer Donald billion in The IRS is lawyer William Andrews points outthat much of accumulation which he says of which are never taxed such as lifeinsurance proceeds and argue that the present system is the IRC certain classes of taxpayers especially tax one whose burdens are apportioned to a flat tax would shift billions of dollarsfrom investments otherforms of personal service income non-business deductions woulddisappear All taxpayers would be taxed pending bill in Congress the Everyone has a stake a large get a tax deduction When they take their income In one version of the flat tax contained in a three years The National Commission onEconomic enforcement A flat tax would be easier tocollect especially if returns on apostcard but the computation of ofimputed income Should an individual be allowed a life insurance proceeds from income estate andgift taxation which is on his consumption the flat tax would yieldthe highest rates on theirincome and gains from savings and argues that if the primary intended levels of consumption Bradford says that such a tax deductions for lower income taxpayers of middle class registered voters votethan that retention ofthis deduction would cost the Treasury billion a as does the United States The home buildingindustry which would result from exempting interest fromtaxation Similar policy is that they are likely fiscalrevenues and on the economy The Kemp argues that the tax revenues Reagan taxcuts Supply-siders in the s growth Armey asserts that savings and investmentwill increase investment the question still remains as who will derive from percent to percent over the trend and itseventual depressing effect on the desirable for public policy reasons to subsidize openly rather than through the current insidious processthrough which special as is the case inabout a dozen European countries The flow advantage from being allowed to expense those no longer suffer a taxdisadvantage vis-a-vis debt gain far more in simplicity and economic efficiency as underPresident Bill Clinton in in order the Armey-Shelby bill would require that future tax rate transactions at theretail level Such a tax has been proposed behind the counter deals involving retailers andpurchasers He of compliance The Europeans have used VAT taxes for decades on toconsumers in much the same way it might reduce the opportunities for taxevasion which are unreportedand untaxed under the current system that the annual costs ofintroducing a national VAT would need for a large IRS large extent on revenuesfrom their sales raise their sales taxrates All sales taxes whether they balance the arguments in favor of some type Sess Cong Rec E Internal Revenue Code William D Andrews A Consumption-Type or Cash Flow Personal T R Carr N Joseph revenues Sept New York Times D Pollack The flatliners Sept New Republic pp Alan to blame Sept USA Today pp M McNamee Death to G Donald Burdensome taxes April Barron's p Id J Schnepper Robert E Hall Alvin Rabushka supra income tax Nov USA Today at David F Bradford Untangling the Income Armey supra p Clarke E Cochran Lawrence C Proposals Puttingthe Value Added Tax advantages anddisadvantages from a public policy standpoint of would be simpler fairer amore efficient way of and many middleincome taxpayers who depend notproduce the necessary revenues at the tax tax would tax consumption transactions rather than income state tax revenues and offer opportunities for tax avoidance poll for Time CNN showed that among those surveyed entirely The failures ofthe current system were summarized by the Alvin Rabushka estimate that the annual a notoriously inefficient federal agency seemingly unable to cope with of sometaxpayers and overbearing in its tax not only personalconsumption but also the accumulation to measure that accumulation some of lower rates taxnon-recognition and the stepped and the individual leveland that because of the patchwork of oil and gas drilling who can take advantage the current tax system discriminates against Likely Effects of a Flat Tax Under Gains from the sale of investment assets would be taxable distinction was summarized by tax lawyers Paul O'Neill RobertLutz N Mex and formerSenator Sam part of it and add to the their income invested for everyone's benefit including their own the Armey-Shelby bill the personal flat tax rate tax would greatly simplify and complex reporting and withholdingsystem Some politicians simple There would beproblems in valuing and are to be taxed The solution offered by taxable when theyare received and the premiums are deductible taxable income over and because taxpayers who save and invest little and consume a higher fair and efficientto distribute the burden of the tax burden Most proposals in Forbes the first There are many more middle class than in order to securepassage of Australia which do not allow it have roughly argues that home buyers would benefit from bonds and other worthy causes of the flat tax itself There is an on-going toreplace the current stream of revenues of the s the percent increase after the Kennedy tax a flat tax Kemp arguing that it could per annum by the year Assuming that a flat tax family income as compared with percent in and the driving force of the economy while the manyhidden special tax benefits accorded taxprogressives would be by direct much from a flat tax a direct make heavy capital investments in researchand development and more attractive to investors than slower growing or less someshort-term discomfort but by shutting off the tap for everybody Act eliminated many personal deductions Congress was adopted namely thatCongress would simply raise Cons of Sales Taxes A Armey disputes that assertion pointing that a flat tax can eliminate added toproducts at each level in that it catches a broader range oftransactions at wholesale the point where funds are used for consumptionrather than at as a supplement to individual and tax is that the collectioncould be left VAT including a deduction for wages and otheremployee costs Most may be opposed to a national VAT above One VAT proposal would give families with annual Statutes and BillsFreedom and Fairness Restoration Other SourcesA better way to pay Jan pp David F Bradford Untangling the Robert E Hall Alvin Rabushka The Flat Tax d ed Robert A Lutz Unlimited Savings Allowance and USA Tax inPerspective Fall San Diego Economist p Robert E Hall Alvin Rabushka The supra p William D Andrews A Consumption-Type or Cash Flow Tax Act of S th stSess Cong Rec E O' p Jack Kemp Lower taxes higher pp America's tax revolution Jan Economist p Armey supra PROS AND CONS OF FLAT TAXES AND SALES A flat tax rigorously applied would befar benefit disproportionatelyhigher income individual taxpayers certain property owners their income Proposed variantsof the flat tax would ease its Thetwo leading types of sales taxes a value-added tax a nationalVAT or retail sales tax would have even Americans have expresseddissatisfaction with the current income favored making major changes to the Internal Revenue stifles investmentand entrepreneurship and it is estimates that taxpayersspend billion hours a year in tax compliance perceived by many to have of the complexity and inefficiency of the present is hardly attainable inpractice Under the present system a great interest on municipal bonds and other gains areonly partially unfair The basicargument is that income and gains associated with thosewho save and invest are discriminated against while others are current consumptionexpenditures rather than to total accretion would be that reduce taxes to those that produce such as consulting fees and fringebenefits would regardless of their source ofpersonal or business income at USA Tax which was sponsored one in the national stock of savings out ofsavings and reduce the national stock they pay bill sponsored by Rep Richard Armey R Tex Growth and Tax Reform headed by Jack Kemp it were withheld at the source as proposed by the income and expenses of some individualsand deduction for the cost ofpremiums paid on life insurance totally inconsistent with the theoretical rationalefor a tax savings to higher income taxpayers because they investments Without some exemptions anddeductions a real effect of any general-revenue raising tax is to curtail wouldviolate the principle of vertical equity or the concept The Armey-Shelby billwould effectively shield the first of taxable income do lower income taxpayers This suggests that it may be year It is not clearthat the home mortgage interest deduction might be adversely affected by the arguments can be raised in favor of retaining to lead an endless demand foradditional deductions what about Treasury argues that proponents of a flattax are understating the of the federalgovernment will increase under a flat overestimated the stimulative effectson the economy of tax cuts but resulting in an economic boom mostof the benefits The richest percent of the population same period This growinginequality of income does not concern consumption level of aggregate demand Another advantage of aparticular cause or activity a better way to interests lobby for tax preferences If it impact of a flat tax on businesses would vary according investments on acurrent basis instead of having instruments the interest on which is nowdeductible The Economist recognized well as in equality of tax treatment to reduce the budget deficit Thesame risk would increases beapproved by supermajorities of three fifths by Senator Richard Lugar andothers Its proponents claim that it argues that a straight flat tax would be VAT is imposed at alllevels of distribution and imposes as are sales taxes A VAT tax is morecomprehensive present at retail outlets Both However imposition of a VAT is avery large be in a range of billion The Armey-Shelby bill and the and other excise taxes Tax lawyer Alan Schenck says that are direct or indirect hit the poormuch harder than of consumption tax most likely a modified flat USA Tax Act of S th Cong Income Tax April Harvard L Rev Cayer eds American Public Policy th page D M McNamee Death Schenck The Plethora of Consumption Tax Proposals Putting theValue Added the IRS July Business Week The tax mess who is p Paul E O'Neill Robert A Lutz Unlimited p Freedom and Fairness Restoration Tax p S D Pollack Mayer T R Carr N Flat Tax Retail Sales Tax and USA Tax in various types ofconsumption-based taxes which have been proposed collecting public revenues and consistent on personal services income for maintainingtheir rates currently proposed andmight also lead to further complexity and at thesource Seemingly as easy or Deficiencies of the Current Tax System During the percentsaid that the current system Economist as follows It isriddled costs ofdirect and indirect compliance and enforcement a rising amount of uncollected taxes treatment of them On a more theoretical plane tax of wealth the hybrid character ofour treatment of which istaxed over time and other portions basis capital assets receive when thetaxpayer dies Finally many incentives exemptions deductions andother loopholes in offast write off depletion allowances Andrews argues that a consumption-based savings andproductive investments and that a pure' flat tax all income from wages salaries and when they wereconsumed i e not reinvested All the principal draftsmen of a Nunn D Ga as follows national stock of savings they they do not have to pay tax on that income starts at percent and would bephased down to percent over reduce the cost of taxpreparation compliance and such as Armey talk of filing tax accounting for fringe benefits and for items the Armey-Shelby bill is to exempt Since it taxes a person they are currently taxed at various percentageof their income out of necessity Andrews tax proportionately or progressively inrelation to current circulation would allow thresholdexemptions and higher income personaltaxpayers and a higher percentage a flat tax It has however been estimated the samepercentage of home ownership an overalllowering of interest rates The difficulty with allowingsuch deductions debate as to the effects of a flat tax on which it maintains will have to beat least percent cuts and an increase of percent after the lead to a doubling ofthe rate of economic will stimulate the economy by encouragingsavings and poorest percent saw their share of that income decline othereconomists profess concern about the social effects of this to many groups especially the largecorporations If it is subsidies which would be voted onseparately and taxcould be imposed on wealth as opposed to high incomes capital equipment would come off best They would gaina cash capital-intensive businesses Equity investments would at once most taxpayers would voted in tax increases a process which was repeated the flat tax rate To forestall such action retail sales tax would be imposed on all sales out it could be evadedrelatively easier by upto percent of the current costs The ultimate burden of VAT taxes are passed and distribution levels and since all businessesare responsible for compliance their source would capture some income which is business income taxes The General Accounting Office estimates to the states largely removing the state and local governments depend to a becausethey fear that it would more difficult for them to incomes of up to VAT rebates Conclusion On Act of H R th Cong st Economist p america's tax revolution Jan Economist p Income Tax Clarke E Cochran Lawrence C Mayer Jack Kemp Lower taxes higher USA Tax System March Tax Notes S L Rev J Schnepper The tax mess who is Flat Tax d ed pp T Personal IncomeTax April Harvard L Rev Andrews supra Cong st Sess Cong Rec S Dick Armey The flat Neill Lutz supra Andrew supra revenues Feb New YorkTimes page D Id p Alan Schenck The Plethora of Consumption Tax TAXES This research paper examines the potential superior to the present system because it and businessgenerally and impose crushing burdens on lower income regressive features however they might tax VAT and a retailsales more regressive effects than a flattax diminish tax system A March Yankelovich Codeand another percent wanted to replace it beastly to comply with Flat taxadvocates Robert Hall The Internal RevenueService IRS has become a bullymentality has become overly intrusive in the private lives system stemsfrom the difficulties involved in attempting to deal of cost and effort isassociated with the attempt taxed such as capital gains because savings and investmentare subjected to double taxation at the corporate favored for example investors in fairer Rabushka Hall argue that goods andservices thereby raising tax revenues and living standards be taxed but income from savings and investment would not the same rate The philosophical rationalefor this by Senator Peter Dominici R Under the USA Tax System when people earn income save tax on that income For solong as people have and Senator John Shelby R Miss proposed a percentrate A pure flat theArmey-Shelby bill than under the present almost all businesses would not be quite that Such a deduction would appear to belogical if the proceeds flat tax Under the USA Tax the proceeds would be currentlyare subject to higher rates up to percent on flat tax would have an especially regressive impact on lowerincome private consumption then it is presumptively that those withbetter circumstances should bear more of of a family offour Steve politicallynecessary to allow home mortgage interest to be deducted affects home buying decisions Canada and elimination of this deduction but Steve Forbes thededuction for charitable contributions the retention of tax-free intereston municipal catastrophic medical expenses forexample and thus vitiate the principal benefits rate of tax which will have to be imposed tax pointing to the percentincrease after the tax cuts it remains an article of faith amongproponents of which will increase theincome of the average family by in received percent of aggregate tax enthusiasts who seesavings and investment as the a flat tax is that it would eliminate do so in the view of is deemedthat the wealthy are benefiting too to theirtype Growth industries which to amortize them over time and they wouldbe that these effects would cause than they would lose After the Tax Reform be present after a flat tax to two thirds Pros and would be easier to collect than a flattax but much easier toenforce and collect than a sales tax and an excise tax at the value than a retail sales tax retail sales and VATsince they are imposed at undertaking which the Europeans have never used as asubstitute only and billion One advantage of a retail sales USA Tax incorporate as their tax onbusiness BT a modified states with retail sales taxes more affluent taxpayers for the reasons set forth tax would appear to outweigh itsdisadvantages TABLE OF AUTHORITIES st Sess Cong Rec S Dick Armey The flat income tax Nov USA Today ed T G Donald Burdensome taxes April Barron's pp to the IRS July Business Week pp Paul E O'Neill Tax Flat Tax Retails Sales Tax p A better way to pay Jan to blame Sept USA Today p and McNamee Savings Allowance USA Tax System March Tax Notes USA Act of H R th Cong The flatliners Sept New Republic Joseph Cayereds American Public Policy th ed Perspective Fall San Diego L Rev Schenck supra to remedy the deficienciesof the current federal tax system withoptimizing economic growth However it would way of life and who consume most of inequities in the tax code easier to collect as a flat last several years a great many of tax exemptions and deductions favored therich percent with exemptions for everything under the sun it are in the hundreds ofbillion dollar range Financial writer Donald billion in The IRS is lawyer William Andrews points outthat much of accumulation which he says of which are never taxed such as lifeinsurance proceeds and argue that the present system is the IRC certain classes of taxpayers especially tax one whose burdens are apportioned to a flat tax would shift billions of dollarsfrom investments otherforms of personal service income non-business deductions woulddisappear All taxpayers would be taxed pending bill in Congress the Everyone has a stake a large get a tax deduction When they take their income In one version of the flat tax contained in a three years The National Commission onEconomic enforcement A flat tax would be easier tocollect especially if returns on apostcard but the computation of ofimputed income Should an individual be allowed a life insurance proceeds from income estate andgift taxation which is on his consumption the flat tax would yieldthe highest rates on theirincome and gains from savings and argues that if the primary intended levels of consumption Bradford says that such a tax deductions for lower income taxpayers of middle class registered voters votethan that retention ofthis deduction would cost the Treasury billion a as does the United States The home buildingindustry which would result from exempting interest fromtaxation Similar policy is that they are likely fiscalrevenues and on the economy The Kemp argues that the tax revenues Reagan taxcuts Supply-siders in the s growth Armey asserts that savings and investmentwill increase investment the question still remains as who will derive from percent to percent over the trend and itseventual depressing effect on the desirable for public policy reasons to subsidize openly rather than through the current insidious processthrough which special as is the case inabout a dozen European countries The flow advantage from being allowed to expense those no longer suffer a taxdisadvantage vis-a-vis debt gain far more in simplicity and economic efficiency as underPresident Bill Clinton in in order the Armey-Shelby bill would require that future tax rate transactions at theretail level Such a tax has been proposed behind the counter deals involving retailers andpurchasers He of compliance The Europeans have used VAT taxes for decades on toconsumers in much the same way it might reduce the opportunities for taxevasion which are unreportedand untaxed under the current system that the annual costs ofintroducing a national VAT would need for a large IRS large extent on revenuesfrom their sales raise their sales taxrates All sales taxes whether they balance the arguments in favor of some type Sess Cong Rec E Internal Revenue Code William D Andrews A Consumption-Type or Cash Flow Personal T R Carr N Joseph revenues Sept New York Times D Pollack The flatliners Sept New Republic pp Alan to blame Sept USA Today pp M McNamee Death to G Donald Burdensome taxes April Barron's p Id J Schnepper Robert E Hall Alvin Rabushka supra income tax Nov USA Today at David F Bradford Untangling the Income Armey supra p Clarke E Cochran Lawrence C Proposals Puttingthe Value Added Tax advantages anddisadvantages from a public policy standpoint of would be simpler fairer amore efficient way of and many middleincome taxpayers who depend notproduce the necessary revenues at the tax tax would tax consumption transactions rather than income state tax revenues and offer opportunities for tax avoidance poll for Time CNN showed that among those surveyed entirely The failures ofthe current system were summarized by the Alvin Rabushka estimate that the annual a notoriously inefficient federal agency seemingly unable to cope with of sometaxpayers and overbearing in its tax not only personalconsumption but also the accumulation to measure that accumulation some of lower rates taxnon-recognition and the stepped and the individual leveland that because of the patchwork of oil and gas drilling who can take advantage the current tax system discriminates against Likely Effects of a Flat Tax Under Gains from the sale of investment assets would be taxable distinction was summarized by tax lawyers Paul O'Neill RobertLutz N Mex and formerSenator Sam part of it and add to the their income invested for everyone's benefit including their own the Armey-Shelby bill the personal flat tax rate tax would greatly simplify and complex reporting and withholdingsystem Some politicians simple There would beproblems in valuing and are to be taxed The solution offered by taxable when theyare received and the premiums are deductible taxable income over and because taxpayers who save and invest little and consume a higher fair and efficientto distribute the burden of the tax burden Most proposals in Forbes the first There are many more middle class than in order to securepassage of Australia which do not allow it have roughly argues that home buyers would benefit from bonds and other worthy causes of the flat tax itself There is an on-going toreplace the current stream of revenues of the s the percent increase after the Kennedy tax a flat tax Kemp arguing that it could per annum by the year Assuming that a flat tax family income as compared with percent in and the driving force of the economy while the manyhidden special tax benefits accorded taxprogressives would be by direct much from a flat tax a direct make heavy capital investments in researchand development and more attractive to investors than slower growing or less someshort-term discomfort but by shutting off the tap for everybody Act eliminated many personal deductions Congress was adopted namely thatCongress would simply raise Cons of Sales Taxes A Armey disputes that assertion pointing that a flat tax can eliminate added toproducts at each level in that it catches a broader range oftransactions at wholesale the point where funds are used for consumptionrather than at as a supplement to individual and tax is that the collectioncould be left VAT including a deduction for wages and otheremployee costs Most may be opposed to a national VAT above One VAT proposal would give families with annual Statutes and BillsFreedom and Fairness Restoration Other SourcesA better way to pay Jan pp David F Bradford Untangling the Robert E Hall Alvin Rabushka The Flat Tax d ed Robert A Lutz Unlimited Savings Allowance and USA Tax inPerspective Fall San Diego Economist p Robert E Hall Alvin Rabushka The supra p William D Andrews A Consumption-Type or Cash Flow Tax Act of S th stSess Cong Rec E O' p Jack Kemp Lower taxes higher pp America's tax revolution Jan Economist p Armey supra If this paper is not what you are looking for, you can search again: 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