The Current Federal Income Tax System - 1332 Words

The current federal income tax system in the United States (U.S.) is progressive based on the vertical equity principle. However, the tax code is getting increasingly complex and the wealthy are able to avoid paying taxes through loopholes. Hence, more people are yearning for fairness in taxation. With the looming 2016 presidential election, Senator Rand Paul’s proposal of ‘Fair and Flat Tax’ appears to have the most significant change to the current tax policy and I will now analyze if this proposal will improve the efficiency and equity of the U.S. tax code. Senator Paul’s proposal has offered a 14.5% flat rate tax that will be evenly applied to all forms of personal income, including salaries, wages, rents, dividends, interests and capital gains. The tax credit for child and the Earned-Income Tax Credit (EITC) will be retained to help the low-income earners. Study has shown that removing the EITC will cause about 16 million low- and moderate-income earner families to fall into or deeper into poverty (CBPP, 2015). Besides that, the standard deduction per filer will be increased to $15,000 and personal exemption to $5,000 – a family of four will not be taxed for the first $50,000 of income. According to the Tax Foundation’s Taxes and Growth (TAG) Model, wage rates will be lifted by 3.6% if the U.S. were to adapt the Canadian corporate flat tax of 15% (Hodge, 2015). Hence, low-income earners are not worse off with the higher standard deduction and increase in basic wagesShow MoreRelatedWhy the Flat Tax is Better for Am erica Than the Income Tax Essay1373 Words   |  6 Pagespay any income taxes? This is approximately 66 million out of 151 million that now pay no income taxes. From 1950-1990, the percentage of people that owed no money for federal income taxes and paid no federal income taxes was 22 percent. This has now doubled and is putting our economy and country at its breaking point. Our current tax system penalizes those that work and save money. People who pay no taxes still get to enjoy the benefits. A revolutionary change in our tax system is fundamentalRead MoreAdopting a Single Rate Flat Tax System1448 Words   |  6 PagesRate Flat Tax System The one topic that has continually been a major topic in the United States is the topic of taxes. It has been a key component of political campaigns at all levels since the political scene has been of interest to me. There are two major tax systems that are viable options in the U.S. today. There is the federal individual income tax system and a single rate flat tax system. The U.S. currently uses the federal individual income tax system. This type of tax system got itsRead MoreThe Current Federal Tax System1415 Words   |  6 PagesIn my opinion as to whether or not the current federal income tax structure is fair for most Americans is that it is not fair. The following information will provide support for my decision. The main federal tax brackets are for single individuals, married individuals filing separately, married individuals filing as a couple and individuals filing as a head of household. In the financial year 2014, the lowest tax bracket paid a rate of 10% on in come up to $9,075 while the highest bracket paidRead MoreTax Reform Essay1731 Words   |  7 PagesAmericans. American’s view the tax system as a bad thing and give the government no room to try to change the tax system due to fear. The tax system today in the United States is progressive, the percentage of income individual pays in taxes tends to increase with increasing income. People will pay a higher rate in taxes with higher income. 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