Although I have a strong background in business taxation compared to some, I
did learn a lot in this class. a Liquidations were something that I always wanted
to learn more about. a I deal with them sometimes but on a smaller scale. a I was
happy that we dealt a lot with basis and liquidations. a I think this will be
valuable for me in the future and in my career. a For me, I am so used to dealing
with taxation on a daily basis it is hard for me to even consider an alternative
approach. a Tax law is just tax law, and I just follow it to the best of my abilities. a
Certainly, there are older tax laws that could use updating and simplifying in my
opinion. a
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.). a I don't know
how this would be beneficial to all income earning classes. a 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. a I don't know how a total
overhaul of the current taxation system would work to be honest. a I don't know
that we have the resources to even take something like that on. a 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) explain 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
