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 necessities more expense (Kurtzleben 2013).
Two things are for certain, death and taxes. This course has provided valuable insight on the latter.
Taxes are a revenue generator for the government but more than they are a tool to provide incentive
or disincentive. As governmental spending has increased throughout time, new means of taxation
have arisen. Most know of sales tax and income tax, estate taxes and gift taxes which we learned are
part of the same unified tax system are also well know. Complexity of the tax code can require
accountants and tax attorneys to help lay people understand, there are appealing factors of a simplifier
VAT. A VAT can be used to generate tax at every step in the supply chain with a relatively simple
method while also broadening the base like the sales tax to consumable goods and services consumed
by all. A valid concern is imposing a VAT that will disproportionately affect lower income
individuals since most of their income is spent on consumables while wealthy individuals who have
the means to invest in businesses that will pass on the burden of the VAT to the end customer
There is no shortage of details in the world of taxation, for this my favorite lesson was one I learned
in module one and continued to apply throughout the course. As a tax advisor you are to help meet
your client’s business objectives as tax efficiently as possible. To me this means you need to ask
questions to understand the client’s true wishes, and this means that there are a multitude of paths you
can take. There can be more than one correct answer, or there could be a more tax efficient path but
not one a client wants to take. Throughout this course I have I have found myself concluding “it
depends” more than knowing for certain.
After reading articles about value-added tax and the Fair Tax Act, both seem to provide economic
benefits, however, the Fair Tax Act sounds more appealing. It seems to be focused more on doing
good for the people and helping those who really need their jobs, keep them. The Fair Tax Act plans
to replace income and payroll taxes by implementing national retail sales tax, a revenue replacement
method, and a rebate (FairTax.org, 2007). Since the Fair Tax Act removes income taxes, this helps
companies not raise their retail prices to make up for their high-income taxes. This allows for
competition to drive prices down, keeps labour cost down ensuring more jobs for America, and
improves the performance of retirement/pension funds. Another economic benefit of the Fair Tax Act,
is it removes the cost of corporate taxes and compliance cost of U.S. exports, essentially increasing
the demand for U.S. exports, which in turn creates more jobs and gives U.S. products a price
advantage to foreign products. There are many other benefits to the Fair Tax Act, but these are these
benefits are the ones that essentially benefit the economy.
References:
FairTax.org. (2007). Thumbnail sketch of the FairTaxSM a comprehensive plan to replace income
and payroll taxes. https://www.finance.senate.gov/imo/media/doc/FairTaxThumbnailSketch.pdf
Kurtzleben, D. (n.d.). Commentary: Why the U.S. should adopt a value-added tax. Retrieved April 6,
2023, from https://www.usnews.com/news/articles/2013/01/25/commentary-why-the-us-should-
adopt-a-value-added-tax
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.
