This course has helped me in many ways significantly and has helped me
understand more detail on taxation and the concept surrounding it. With the
final project requiring the tax forms to be complete, I believe I was able to grasp
an understanding a better understanding of each entity and how they are taxed
but I was also able to understand the many advantages and disadvantages of
specific tax implementations associated with each entity. While the numerous
tax codes we researched and discussed over the course of this semester may
have been a little overwhelming at first, the rules and regulations enforced by
the IRS became easier to understand when it came down to applying them to a
real-world scenario. In an overall sense, my well-rounded knowledge and
understanding of taxation have influenced my opinion toward the approach to
taxation that has been enacted by the U.S. Congress. I believe that if Congress
were to consider an alternative approach to taxation, such as enacting a value-
added tax or the Fair Tax Act of 2015, the U.S. economy would be in much
better shape.
The Principles of Interpretation describes in the FairTax Act of 2015 that when
enacting this value-added tax, “any sales tax administering authority shall
consider the purposes of this subtitle” which includes reasons, such as, to raise
the revenue needed by the Federal Government, to tax all consumption of
goods and services in the US once, to simplify the tax law and reduce the
administration and compliance costs of the tax law and to prevent double,
multiple, or cascading taxation” (FairTax Act, 2015). Given the supporting
evidence presented above, it is my opinion that enacting a value-added tax, or
the Fair Tax Act would most definitely provide economic benefits to the United
States. Congress would not only allow for more long-term sustainable growth
but also help individuals save and invest more money today, which ultimately
will boost the economy in the future.
I do believe that congress should consider an alternative approach to taxation. I
work for a CPA firm and the clients I work closely with are in the 37% federal tax
bracket and they are located in California which also adds an additional 12.3%.
One example is a client who sells real estate. She is commission based so she
does not get a W-2 to elect to have withholding and as a rule we tell her to put
50% of all of her commission in the bank account and save it for taxes. Granted
after she gets to deduct all of her expenses she doesn’t owe 50% of her gross
income but she at least has the money to pay taxes and put in her profit sharing
plan. I always wonder why we don’t have a flat tax rate. The government would
still get a percentage of what you earned and taxes would be uniform among all
taxpayer. For example, taxpayer A has AGI of $50,000 and the uniform tax rate
is 15% they will owe $7,500. Then taxpayer B has AGI of $500,000 their tax
would be $75,000.
I find it interesting when reading the Fair Tax Act of 2013 and about VAT. The
Fair Tax Act would be an interesting to see enacted, especially since states vary
in their sales tax rates and income levels. The first thing that crossed my mind is
the need for accounting professionals would decrease if there is no need to file
income, payroll or estate and gift tax returns. The VAT is a simple method of
tracking and paying tax but the US News article states what I was thinking best.
Many experts consider [VAT] to be regressive, that is, it hits poorer people
harder than the wealthy, as it takes away larger share of their income and
makes basic necessities more expense (Kurtzleben 2013).
References:
Kurtzleben, Danielle (January 25, 2013). Commentary: Why the U.S. Should
Adopt a Value-Added Tax.
https://www.usnews.com/news/articles/2013/01/25/commentary-why-the-us-
should-adopt-a-value-added-tax
FairTax Act. (2015, January 06). H.R.25 - 114th Congress (2015-2016). House of
Representatives. Retrieved from
https://www.congress.gov/bill/114thcongress/house-bill/25/all-info
Bansal, A., & Alfardan, A. A. (2020). Role of value added tax in the economic
development of Kingdom of Bahrain. Journal of Critical Reviews, 7(3), 17-24.
