Responding

1) Steve recently bought a truck in Alabama for his business in Georgia. What different types of federal and state taxes may affect this transaction?

 Steve has purchased a good which is considered a sales tax, imposed by most state and local governments. In this case, federal taxes would not be applied as sales tax are not included. Alabama would impose a sales tax on Steve as he purchased a good within that state. Alabama is responsible for collecting this sales tax under the state government. Georgia is responsible for collecting a use tax on Steve as he possesses a good within the state. The purpose of this tax is to prevent individuals from buying goods without sales tax in their home state (Spilker, 2020). Georgia may also charge personal property tax on Steve due to a possession of a tangible vehicle, depending on the state’s requirements.

 

 Montel argues that a flat income tax rate system is vertically equitable. Rene argues that a progressive tax rate structure is vertically equitable. How do their arguments differ? Who is correct?

 Vertical equity refers to a tax system in which taxpayers with greater ability to pay tax pay more tax than taxpayers with less ability to pay. Proportional tax rate is known as a constant tax rate in which tax rates are the same under all levels of the tax base. Flat income tax rate system would fall under the proportional tax rate structure. Progressive tax rate imposes higher tax rates as the tax base increases. Montel may argue that a flat income tax rate is vertically equitable when taxpayers with higher income are more likely to pay more tax dollars. Rene may argue that a progressive tax rate is vertically equitable when taxpayers with higher income should pay in higher tax rates. Both arguments could be valid, so there should be no right answer.

2)   Steve recently bought a truck in Alabama for his business in Georgia. What different types of federal and state taxes may affect this transaction?

I believe Steve’s truck acquisition will be affected by only state taxes for this initial transaction. The first being a sales tax owed to the State of Alabama where the sale of the truck originated. The second tax being a use tax owed to the State of Georgia, this is because the truck will primarily be used for Steve’s business which operates within Georgia. Lastly, Steve will have to pay a property tax owed to the State of Georgia because the truck will most likely have to be registered in Georgia where his business is located. The truck will play a role in other state and federal taxes down the line that Steve will be responsible for but not in the initial purchase of the vehicle.

 Montel argues that a flat income tax rate system is vertically equitable. Rene argues that a progressive tax rate structure is vertically equitable. How do their arguments differ? Who is correct?

These two opinions differ because each system focuses on a different regulation method, a flat tax rate system affects tax dollars paid to promote vertical equitability because while taxpayers share a tax rate, they all pay varying amounts of tax dollars. While the progressive tax rate system uses fluctuating tax rates that increase or decrease based upon the level of income for each individual taxpayer. In the end I found that neither Rene nor Montel was blatantly wrong with their view, both systems promote vertical equitability just in a different way. However, I side with Rene’s position because I believe the changing of tax rates based on income is a better way to establish vertical equitability among taxpayers than using a flat tax rate and focusing on tax dollars paid.

Source

Spilker, B., Ayers, B., Barrick, J., Robinson, J., Weaver, C., Worsham, R., & Outslay, E. (2020). Mcgraw-hill's taxation of individuals and business entities 2021 edition (12th ed.) [2021]. MCGRAW-HILL EDUCATION. Retrieved August 27, 2020.