The Issue of Tax Reform

The Issue of Tax Reform

The issue of tax reform is not a new one. It has been debated since the founding of the very first modern government. At the heart of the debate is what the role of government should be in its citizen’s lives. In the United States the controversy over taxes has been central since the nation’s founding in 1776. To analyze the issue of tax reform one must first look at taxes and what they represent to the United States. According to the encyclopedia Britannica almost all of the Untied States government’s revenue comes from taxes. The most important of all the levied taxes is the personal income tax, which brings in by far the most revenue for the government. This tax was first developed during the civil war, with a rate of approximately 3%. As time progressed, the rate increased, and in 1913 the ratification of the 16th amendment established the basis for our current tax code. The rates became increasingly graduated until shortly after World War II, when the minimum rate was 23% and the maximum 94%. Graduated rates, meaning the rate increases as income increases, have become a world standard for tax policy. The progressive income tax has come to be viewed not only as a vital source of revenue for the government, but also as a vehicle of social reform, helping to redistribute wealth. The problem with the current tax system arises in the fact that income taxes are mandatory, and are not paid in exchange for some specific thing. And while they are supposed to be collected for the benefit of the taxpayers as a whole, the obligation of the individual citizen to pay the tax is independent of any benefit received. Even taxes on wages, called payroll taxes, commonly used for retirement funds and medical payments, have a very weak connection to the benefits received by the individual. Also, any taxpayer knows the time and effort required to file their taxes due to the complexity of the personal income tax is enormous. This is why there is opposition to the current tax system, and why major reforms are being proposed. Tax cuts and changes to tax policy are in fact key programs of the two presidential candidates, Al Gore and George W. Bush. Three main views exist about tax reform. The two major proposals at this time are a flat-rate income tax without deductions or exemptions, and a national sales or value-added tax. In addition to t...

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.... Also, no marriage tax would help eliminate the double taxation of individuals under the current system.

The three major sides currently heading controversy over tax reform: the flat-rate income tax, the national sales tax, and the idea that government should focus on reform in other areas are complicated and very difficult to assess. It is easy to see however that the flat rate income tax would not accomplish its goal of increasing savings and simplifying the tax code, and that those who say that tax reform is not necessary are in error. The tax system has many flaws and does not help to further the economy. It certainly has not helped to bridge the gap between rich and poor, even in this time of economic boom. It is certain that the national sales tax is the best plan for our country and would benefit all taxpayers now subject to the unfair personal income tax. It will shape the argument over tax reforms in the following years and, if enacted, will have a great liberating effect on the United States. Americans can be assured that if the national sales tax is replaces the current tax system, it will have a profound effect on the future of our economy and our nation.