The paper "Do We Have a Fair Taxation System? " is a marvelous example of an essay on finance and accounting. The idea of a fair taxation system in the United States is the federal tax elimination and replacing this with the national sales tax. There exist strong opinions when we consider both sides of the issue of fair taxation and I think we should look at various pros and cons of fair taxation. The current tax system seems complex though I think it would be made fairer (Clark). A fair tax would be much easier to understand as compared to the existing complex tax income system of taxing as the current U. S tax code contains more than 60,000 pages.
However, a fair taxation system would mean the destruction of jobs as workers in the system will be lesser than the current ones. The current taxation system is not transparent as people have no idea of what is in the 60, 000 pages of the existing tax code. This means people with more money tend to pay the accountants to search for loopholes that will evade them tax payments.
For the poorer people, it becomes hard for them to reach the accountant making them end up making the base rate payments. A fair taxing system ensures transparency in a manner that any person will pay the same rate when buying things. On the other hand, if a fair tax is adopted, the sales tax would be higher in order to neutralize the revenue for the government to get the same revenue as the existing system. This would apply more on items that require big-ticket such as cars which would be hard for an individual saving under the current system (Americans for Fair Taxation).
A fair taxing system would mean that tax investments are excluded as the national sales tax is applied. This boosts the stock market and more money will from the sideline assist in turning the markets around. A fair taxing will also lead to the encouragement of the venture capital to invest in the field of entrepreneurship thus boosting the American dream. A fair system leads to the creation of many jobs using the create an influx of capital.
However, a large sales tax may discourage people from buying goods but it also makes people spend less, save more and pay the debt. This is a benefit to economy stimulation as people are out of debt and they don’ t spend what they don’ t have as is the case of the current system. The current system contains an income tax which becomes more burdensome as one makes more money. This leads to a reduction of the incentive to be productive and to work harder as one moves up the ladder.
A fair taxing system is designed to increase the country’ s productivity (Kempion). The current system is not considerate on taxing illegal activities leading to the creation of rich people as a result of untaxed illegal activities with high income such as drug dealing. A fair taxing system has a broad tax base. This means that a fair taxing system taxes anyone every time one buys anything. However, a fair taxing system may create an economy of evading taxes. This can be evidenced under the sales tax where intermediate goods that are under production would end up being not taxed.
This will create a potential for most businesses to claim that their goods are intermediate while they are actually the end products thus evading taxation (Kaneb). In conclusion, the pros of fair taxing systems significantly outweigh the cons and also the complexity of the current taxing system has exposed it to many loopholes of unfairness. This includes a lack of transparency as people who are rich end up evading paying taxes as they pay the accountants to search for the loopholes in the 60,000 pages taxation code.
The rich are also favored through evading taxes in illegal activities that bring a lot of income such as drug dealings. I think the current tax system proves to be unfair as those who are rich have been seen to enjoy a lot of benefits which may not have an effect on these people’ s lives as they are not in need of them. On the other hand, those people that are poorer tend to suffer from the injustices of this system.
This creates a sense of unfairness in this system of taxing. The current system also specializes in the idea of taxing production. This leads to the creation of more burden as people make more money thus reducing the urge to be productive and to work harder as one progress. Fairness, in this case, can be accomplished by the idea of taxing consumption, unlike production. However, in addition to a fair taxing system, another essential thing that requires to be changed is the spending habits of the government that seems out of control.
Finally, this study shows that the current system of taxation is not fair. This calls for the need to adopt a fair system of taxation to enhance equity within the taxpayers and also stimulate the United States’ economy. However, it is not possible to make the taxation system perfectly fair but there is always room to make any existing taxation system fairer.
Americans for Fair Taxation. Flat Tax and Fair Tax. 25 Apr. 2007. Web. 25 Jan.2012.
Clark, D. Pros and Cons of the Fair Tax. 29 Jan. 2009. Web. 25 Jan. 2012.
Kaneb, B. Why we need a fair tax. 6 Sep. 2011. Web. 25 Jan.2012.
Kempion. Fair Taxation .2011. Web. 25 Jan.2012.