The Fair Tax Act Of 2013 Essays

The Fair Tax Act Of 2013 Essays The Fair Tax Act Of 2013 Essay The Fair Tax Act Of 2013 Essay The Fair Tax Act Of 2013 Name: Course: Date: The Fair Tax Act Of 2013 Conditions Surrounding Of the Fair Tax Act The fair tax proposal is meant to eliminate the unfairness in the current tax system. The current taxation policy imposes more on the wealthy population than on the other people. This tax burden is so much to an extent that in 2007 almost half of the overall income taxes were paid by 5% of the richest population while 40% of the citizens did not contribute to the tax pool. This tax system is too discriminatory, and the fair tax would eliminate this deficiency by enabling the citizens to control their tax expenditure. This proposal is however facing criticisms on the basis that it is regressive, and it would make the poor poorer since they spend most of their income on consumption of basic goods. The rich are also going to be favored while the middle class increases its tax burden. This is because the incomes of the middle class will be charged at a higher rate than those earning extremely large amounts of income. This would result to inequality in the society. This taxation system would ease the tax compliance hence promote investments and savings. The prices are also expected to reduce since the businesses will cut down on their costs of production. The system reduces the amount of tax revenue collected, and this would result in a federal budget deficit since it does not also address reduction of government spending. The system would present a big challenge in the collection of taxes and this will lead to tax evasion. The housing sector will be affected negatively since it will no longer be favored. Historical Links Of the Taxation Policies The taxation policies have undergone various reforms over the years. Around 1817, the government relied heavily on tariffs and abolished internal taxes. In 1862, an Act was established to ensure the effective collection of taxes and powers given to the commissioner of internal revenue to enact taxation laws. The 16th amendment of 1913 made income tax a significant source of the nation’s revenue. This was presided by unfair taxation policies in the collection of these taxes under the influence of powerful and influential people, which worked in their favor. This resulted in seeking fair and effective methods of tax imposition to maintain equality among members of the public. The fair tax act was one such method which is a viable tax system designed to ensure fairness in taxation. It was first introduced by Linder to the 106th congress in 1999. Similar bills have continuously been introduced to the congress since then. Therefore, the fair tax act is not a new thing to the Americ an citizens. Various committees have been set up to discuss the issue, but the bill has never gone past that stage. The bill has mostly been supported by the republicans, but the democrats have been reluctant in embracing the system. The US president, Barrack Obama opposes the bill arguing that it does not bring progress to tax systems. Proposition for the Fair Tax Act The Georgia for fair tax is a group representing the views of business people in favor of the fair tax system. They propose that the businesses stand to benefit from the system. This is because it eliminates taxes such as corporate taxes that increase the production costs. This means that they will produce at a lower cost and therefore sell at a lower price to the customers. This will allow the businesses have a better ground for competition in the international market hence this promotes international business transactions. Business transactions are not taxed thus facilitating them. Because of the fairness in taxation, a fair ground is provided for all businesses regardless of their sizes. Elimination of payroll taxes promotes reinvestment hence economic growth. Rob Woodall is a congressional representative in favor of the fair tax system. He represents the 7th district of Georgia. He says â€Å"the reason for this is that the fair tax isn’t about simply taxes; it is about f reedom†¦Ã¢â‚¬  (Woodland, 2012). He insists it is a method of preventing over taxation. Fair tax system is the surest way of ensuring equity among citizens. His reason is that the system provides transparency in taxes collected. Similar rate of tax is charged on all goods purchased hence convenience in determine the exact amount of taxes charged on a certain amount of sales. It is of a simple structure and easy to understand unlike the current elaborate system that is too elaborate. The system eliminates allowances such as exemptions that make calculations very complicated and simply gives a simple rate of 23%. Ensures fairness in treatment of all citizens since a similar rate is charged on all kinds of goods regardless of the type. It would enable the realization of dreams among the people by minimizing the amount of taxes they pay from their hard work. It would offer freedom to the citizens and relieve the congress off its power to manipulate tax collection. This bill has ha d many sponsors who have taken a broad step in introducing it in various congress sessions. The greatest sponsor is John Linder who was the first to introduce the bill and continued to push for its adoption until his retirement. He even wrote a book, â€Å"The Fair Tax Book†, which explains his position in this system. He supports the fair treatment that it has to offer. Opposition One of the major opposers of the system is president Obama who supports a more progressive taxation system, which the system does not offer. Another group is the economists who represent the analytical population in the country. â€Å"FairTax is too good to be true, and voters should not take seriously any candidate who supports it† (Bartlett, 2007). There is a great risk in implementing this system. It encourages the reduction of the amount of taxes paid by citizens. This will mean that a lower amount of overall taxes will be collected by the government. It does not provide a method to cut down on the government expenditure. This results in a budget deficit. This deficit is not healthy for an economy since the government will have to adopt alternative measures to finance its expenditure. One of the financing alternatives is borrowing of funds that can be done internally or externally. This eventually translates into accumulation of debts. This hinders the economic growth of a country and reduces its credibility to the outside world hence the government will have problems in qualification of loans in the end. This will result in a government that spends what it does not have and relies on handouts for survival. Social Justice Social justice is the practice of maintaining equality and cohesion in a society by maintaining a balance in treatment of various social classes (younkins, 2000). The fair tax act is an issue of social justice since its effect has major effects on the social structure of the society. It is a progressive tax system meaning the poor pay lesser than the rich. Heavy taxes are charged on the poor and the amount collected is used in providing services for the society. This shows maintenance of balance among all the citizens and reduces the gap between the poor and the rich. This system also ensures fairness since taxes are charged on goods that all members of the society consume meaning every citizen will contribute to the taxes and regulate the amount of taxes paid through regulating consumption. Reference Bartlett, Bruce. (August 25 2007). The deceptive presentation of the fair tax proposal. Economist’s view. Retrieved from http://economistsview.typepad.com/economistsview/2007/08/the-deceptive-p.html Younkins, Edward W. (September 30 2000). Taxation and Justice. Capitalism and Commerce. Retrieved From quebecoislibre.org/000930-11.htm Woodland, Rob. (2012). The Fair T Woodland Ax. Congressman Rob Woodall. Retrieved From http://woodall.house.gov/issue/fairtax