Negatives of the Proposed Tax System

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1. Negatives of the proposed tax system
The income tax system ensures a stable source of income for the government. Even at 10% unemployment rate, the government will still make money out of the remaining 90% of the workforce. So long as the workers make money, so does the government. Therefore, the government does not have to worry about where to get money even in an economic depression. However, this is a luxury that the government will not enjoy with a single federal taxation system. Gasoline prices and usage is affected by market trends and economic performance. At one give time, consumption will be low and its fluctuating price will keep affecting how much the government makes from a single gallon. Therefore, unlike the case with income tax, the government will not have a steady source of income. This will affect the economy and the wellbeing of the society (Nishiyama & Smetters, 2005).
The proposed taxation technique is also uncertain. With income tax, the government is able to calculate the amount of money it expects because it has employment records and all employees are registered with the revenue service. However, with gasoline, forecasting consumption is difficult because you do not know when the price will change, when the consumers will resort to use a substitute product or when the supply will go down. This presents the government with financial planning challenges which can be easily eradicated with a more certain taxation system such as the income tax. Government planning is very crucial when it comes to economic and social development. Inadequate planning can have serious economic effects on the society. Therefore, with the new system in place we not only face a taxation challenge but also an uncertain economic ...

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... of wealth, the current tax system is fair. O the other hand, most populations use and favor the income tax system since it does not dig deep into one person’s pocket and leave others out. Everyone gets to do his part (Conesa & Krueger, 2009).

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Conesa, J. & Krueger, D. (2009) Taxing Capital? Not a Bad Idea after All. American Economic Review, 99(1): 25.48.

Correia, I. (2010).Consumption Taxes and Redistribution. American Economic Review, 100: 1673.1694.
Jehle, G. & Reny, P. (2000). Advanced Microeconomic Theory. Addison Wesley Paperback, 2nd Edition:

Nishiyama, S. & Smetters, K. (2005).Consumption Taxes and Economic Efficiency with Idiosyncratic Wage Shocks. Journal of Political Economy, 113(5): 1088.1115.
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