The topic on tax always seems to be the most difficult for me. I feel like there is endless
information that needs to be known and followed when discussing tax. Therefore, now and in the
module, sections it was good to be able to dive into the meanings behind tax and why they are
done the way they are. I love that there are endless resources to use when the tax topic is brought
up. Using the resources is what and how I got through this course and the previous tax course I
had to take. I have friends who reach out to me now asking for tax advice and i inform them I am
the last person so give any type of tax advice I would recommend going to see a tax professional.
I feel like the tax protocol changes all the time therefore, I do believe congress should consider
other approaches. I feel like if they do this and keep up with the times and the technology it is
important. I am sure that the Fair Tax Act and those alike benefit a certain tax group and will
always do so. I believe that taxes should be based on the income being brought to the table. "[The
Fair Tax Act] would allow the nation’s wealthiest families to accumulate even greater
intergenerational wealth, thereby widening the nation’s already sizable wealth gap" (Ross 2023
p2). I believe this statement right here and the "plan" congress has on making this a thing is very
unfair to the people that work day in and day out to provide for their families. If everyone was
expected to pay the same percentage from their yearly salary then it would be “fairer” to
everyone. Rather than making the "wealthy wealthier." This "plan" only seems to benefit the
wealthy that is already wealthy, so no, there is no benefits for everyone.
A good explanation and introduction from my federal taxation of individuals class were the words
from Benjamin Franklin: “Nothing is certain except death and taxes”. The two inevitable things in
life that we are not able to avoid. Not even leaving the country, talking about the taxes, because our
tax law is based on territory. According to the IRS, “If you are a U.S. citizen or resident alien, the
rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same
whether you are in the United States or abroad. You are subject to tax on worldwide income from all
sources and must report all taxable income and pay taxes according to the Internal Revenue Code”.
Anyways, I have learned a lot from this class about the other side of the coin, the federal income tax
of corporations and partnerships. d Also, this class taught me the “pros and cons” choosing each entity.
While picking one from another, each one was unique according to the business or personal goals. d
Now, the Fair Tax Act is planning to replace the mass income tax with a class income tax and a
federal value-added tax. This plan is trying to find a balance but even though it is targeting poverty,
it is my opinion that there will always be a sector trying to get the advantage of the system. After the
pandemic, getting the task force has been difficult for some companies because many people realized
that “teleworking” and passive income were ways to manage their own lives instead of being ruled by
a “schedule” or work for somebody else. As with any other project, it has “ups and downs” or taking
out and bringing new concerns to the table. When many people believe that our tax regulations are
favored by some and not others, poverty is not going to be eradicated by facilitating monthly checks
or providing advanced tax refunds. It has to be more educational and work on the problem with the
resources we have on our hands. d
VAT, or value added tax, would provide a benefit to the US in the form of increased tax revenue.
however, the management of the revenue would be an ongoing concern. if the revenue was used for
specific programs, such as the full funding or expansion of programs for education (primary and
college) or funding healthcare or other social security programs, I could get behind that. no one in
this country should have to be concerned with their next meal, high medical expenses, food, or a roof
over their heads (regardless of their past transgressions). however, I think for this to happen, laws
would need to be written to make it so the funds are used correctly and not for other interests.
However, there is a concern about those who are already struggling to provide necessities and the
implementation of a VAT. as a VAT is a tax universally applied, it would be applicable to those who
struggle. without raising taxes on the wealthy, this could potentially create further wealth inequalities
(Investopiedia team, 2022). this could be viewed as a regressive tax so if it's implemented in the US,
a tax on those who are very wealthy should also be implemented in tandem. The current tax system
works well for the current economy. However, with different economies or future economies, the
current tax system may not always be the best. I personally find value-added tax to be helpful in some
cases, such as raising children. I do not feel quite as comfortable with the Fair Tax Act yet. The Fair
Tax Act of 2015 is a “tax reform proposal that imposes a national sales tax on the use or consumption
in the United States of taxable property or services in lieu of the current income and corporate income
tax…” (114th Congress, H.R.25 – FairTax Act of 2015). In my opinion, this may discourage
spending, and overall put more burden on lower income families’ lifestyle. Furthermore,
discouraging spending may harm the overall economy. This creates a vicious cycle of low spending,
unstable economy, and deficit tax revenues. However, I do think that there are certain amendments to
the Fair Tax Act of 2015 that may make it work better.
Although I have a strong background in business taxation compared to some, I did learn a lot in this
class. Liquidations were something that I always wanted to learn more about. I deal with them
sometimes but on a smaller scale. d I was happy that we dealt a lot with basis and liquidations. I think
this will be valuable for me in the future and in my career. For me, I am so used to dealing with
taxation daily it is hard for me to even consider an alternative approach. d Tax law is just tax law, and
I just follow it to the best of my abilities. d Certainly, there are older tax laws that could use updating
and simplifying in my opinion. d
The Fair Tax Act proposal "would eliminate income, payroll, estate and gift taxes, to be replaced with
a 23% national sales tax" (CNBC, n.d.). I don't know how this would be beneficial to all income
earning classes. d From what I have read it seems like something like this would hurt the middle class
the most and the highest earners would get the most breaks. d I don't know how a total overhaul of the
current taxation system would work to be honest. I don't know that we have the resources to even
take something like that on. d It would be a huge learning curve on every level down to the people who
manufacture goods or the cashiers that check people out at stores.
This class has greatly expanded my knowledge in taxation. I want to point out a few of the biggest
takeaways I have from the class, and outline why each aspect is so important. First, Anderson et al.
(2023) explains that there are several ways one can set up a business. The simplest options, such as a
sole proprietorship or partnership, offer simple tax situations but limited bells and whistles. There is
no limited liability protection and owners cannot be separate employees. On the other hand,
corporations are about as complicated as it can get. They are a separate business entity from owners,
which offers liability protection and flexibility for owners to also be employees. However, they also
lead to double taxation, which can often mean more taxes. Furthermore, gift tax rules are incredibly
interesting. Erskine (2022) explains that gifting money to someone can lead to tax consequences.
However, there are exemptions to these taxes. Annually, people can give $17,000 worth of assets to
individuals without the individual having a tax consequence. On top of that, people have a lifetime
exemption of $12.92 million. That means that if they go over that annual limit, they can begin to
draw on this. All of this is very important for high-net-worth individuals with heirs. Gift taxes can be
as high as 40%, so you really need to watch these exemptions closely and see if more needs to be
done.
There are always new ideas coming about to overhaul the way taxes are collected in this country.
Gale and Pomerleau (2023) explain that the fair tax act proposes to replace almost all federal taxes
with a 23% retail sales tax. This, and things like value-added tax, could completely overhaul the
current system. My opinion? I do not see a lot of economic benefit here. I think that we have been
using the system we have had for a while. I think that a tax added to goods when purchased seems
like it could be a good idea. However, the richest people save the lion’s share of their income, and
they will largely avoid tax this way. I believe that instead of an overhaul, they should focus on filling
gaps and loopholes.
References:
Anderson, K., Hulse, D., and Rupert, T.,. Prentice Hall’s Federal Taxation 2023 Corporations,
Partnerships, Estates & Trusts. 2023.
Erskine, M. (2022). Forbes. IRS Announces Estate and Gift Tax Exemption Amounts For 2023.
Retrieved from: https://www.forbes.com/sites/matthewerskine/2022/11/04/irs-announces-estate-and-
gift-tax-exemption-amounts-for-2023/?sh=5532c05c2817
Gale, W. & Pomerleau, K. (2023). Proposed FairTax rate would add trillions to deficits over 10 years.
Retrieved: https://www.brookings.edu/2023/03/01/proposed-fairtax-rate-would-add-trillions-to-
deficits-over-10-years/
Katedore. (2023, January 27). The fair tax act, explained: What to know about the Republican plan
for a national sales tax, decentralized IRS. CNBC. Retrieved April 6, 2023, from
https://www.cnbc.com/2023/01/27/the-fair-tax-act-explained-what-to-know-about-the-republican-
plan-.html
Congress. (n.d.). H.R.25 - 114th congress (2015-2016): FairTax Act of 2015. Congress.gov. Retrieved
April 4, 2023, from https://www.congress.gov/bill/114th-congress/house-bill/25
Team, T. I. (2023, April 1). Value-added tax (VAT). Investopedia. Retrieved April 2, 2023, from
https://www.investopedia.com/terms/v/valueaddedtax.asp
U.S. Citizens and Resident Aliens Abroad | Internal Revenue Service (irs.gov)
International Taxpayers | Internal Revenue Service (irs.gov)
Anderson, K., Hulse, D., Rupert, T. Pearson’s Federal Taxation 2023 Corporations, Partnerships,
Estates, and Trust. Pearson 2023
Pratt, K. (2022). Learning to Live Without Form 1040. Tax Lawyer, 75(2), 411–442.
Ross, J. (2021, November 17). The 'fair tax' act would radically restructure the nation's tax
system in favor of the wealthy. Center for American Progress. Retrieved April 6, 2023, from
https://www.americanprogress.org/article/the-fair-tax-act-would-radically-restructure-the-nations-
tax-system-in-favor-of-the-wealthy/
