INTRODUCTION
As the supreme ruler of my own country, I need to raise $60,000 in taxes from three households. It is necessary to design a fair and effective tax system to raise money based on their family and income conditions. Next, I will explain the criteria and key design elements of the tax system in my country. Last, I will compare the designed tax system with the U.S. tax system.
System Criteria
The tax system in our country is based on Adam Smith’s Canons of Taxation. 1. Equity. Rich people should pay a higher tax than people with lower income; single should pay a higher tax than household. 2. Certainty. Our government will notify households how much tax they are going to pay in advance. The government will also ensure the purpose of the tax collection. 3. Convenience. Tax payments will be accessible and convenient to tax payers. All the tax brackets and deduction rules are clear and easy to understand. 4. Economy. The purpose of designing this tax system is to raise money for public good, for example, road repairs and garbage removal, etc.
Key Design Elements
The key elements of the tax system are progressive tax rate, filling status, dependency exemption, donation exemption, personal deduction, job expense deduction, and a preferential tax rate for capital investment.
Our government institutes a progressive tax rate based on filing status, which classify into three categories: single (8.25%), married without children (6.75%), married with children (5.25%). Those three tax brackets increase the simplicity and efficiency of tax payments. Single has highest tax rate because they are assumed to have less burdens to take care of other family members. Although married couples may have higher income than individuals, the liv...
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...ckets, whereas our tax system is based on filling status. The difference is due to country size and growth of economy. Compared to the U.S., our country is smaller in size with less population. It is important to make the tax policy simple, convenient, and suitable for our national system. To boost our economy and increase the quality of human resource, we choose to provide job expense deduction for people who receive technical training. Both of the tax systems offer personal deduction and dependency exemption to relief tax burdens for needed individuals and families.
CONCLUSION
In conclusion, when designing a tax system, we have to consider social and economic tradeoffs. Regulators should first maximize public interest under those limitations. There is no absolute fair tax system. A “successful” tax system will be improved with the test of time and modifications.
Our current system of taxation is a varied rate percentage based on different income brackets. Many say that it violates our constitutional rights through unequal taxation. Multiple deductions, loopholes, special rates, and a complex system of regulations all characterize our Federal Income Tax System, prompting many to question why it is still being used (Peters, 2013). The current system although bringing in over $3 trillion, taxes income multiple times, and includes the taxing of estate, labor, savings, and investments (National Priorities Project, 2013). The system itself is complex with over 20,000 pages of regulations, requiring a massive filing system, which is set up and maintained by an even larger IRS, requiring over $225 billion in compliance costs (Hall, 2001). One can be hard pressed to find an advantage in the current system, other than the fact that it provides the government with an enormous amount of funds, and it has...
...e, Maxime, and Giuseppe C. Ruggeri. "Flat Taxes And Distributional Justice." Review Of Social Economy 56.3 (1998): 277-294. Business Source Premier. Web. 19 Jan. 2014.
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