Explain how this course has helped your understanding of taxation.
Funny you should ask. My wife and I were having dinner with friends, one of which had just entered
a new business arrangement. He was bringing his expertise, having opened several popular
restaurants he did not own a stake in, the other two stake owners would provide land and capital. His
basis in the new business would be different from the other two owners and therefore his taxes would
be different and potentially expensive, depending on the form of the business. He wasn’t 100% sure
the form and was going to doublecheck. I strongly suggested that he find out, because if the business
was set up as an S-Corp, his tax obligation could be significant. I then got on my soapbox and
harassed our other friend to stop operating as a sole proprietorship, now that her tattoo shop was
getting more and more successful. Everyone needs to protect their assets once they have assets to
protect. The class has helped me terrify my friends.
Do you think Congress should consider an alternative approach to taxation?
d d d d d Before I answer that question, let’s address the elephant in the room, we as a country have a
massive problem. Every American believes they are overtaxed, they pay the highest taxes in the
world, and taxes have never been higher. This is hardly the truth. There are countries that pay much
higher taxes than the US and not that long ago our highest tax bracket was like 90% in the 1940s. I
think part of the issue is that politicians keep telling people they are overtaxed and, arguably, folks
don’t see their income taxes benefiting them. If we are going to successfully implement a new tax
system, we need to do a great deal of work to educate the public. And if the last few years are any
indication, that data will be met with widespread disinformation. But let’s say we caught everyone on
a good day and could implement an alternative approach to taxation in the US.
There are currently two alternatives that keep being proposed, the Value Added Tax and
Consumption Tax. In both situations we get away from income-based taxes and move towards higher
taxes on goods and services. VAT could work, but it shifts so much of the burden to lower- and
middle-income families. Consumption taxes have the same issue, forcing the system to give rebates
to low-income families. In both cases, in my opinion, we are just moving deck chairs on the Titanic.
Congress does need to consider all approaches to taxation. We need to tax wealth and simplify the
income tax system. Make sure everyone (including corporations) pays their fair share. I am also
intrigued by the idea of wealth losing its value if removed from the economy (horded) and a
maximum wage. Maybe I’m just being an instigator, but I am fascinated at how much more upset
people get about a maximum wage (which will never impact them) verses a minimum wage (that
impacts so many).
Would enacting a value-added tax or the Fair Tax Act provide economic benefits, in your
opinion?
Value Added Taxes can raise a great deal of money, is simpler than our current system, and avoids
making the wealthy pay their share. It would benefit the economy but could hurt young and poor
households. Both VAT and the Fair Tax Act of 2015, consumption tax, would tie government
revenues to a more stable variable; but it does so on the backs of the low- and middle-income
households.
A value-added tax would be easy to enforce with an easy paper trail to follow. The downside is that
it would hit lower income families harder when it comes to necessities.
A Fair Tax Act tax on consumption would make taxation very easy and hand out the administration of
it to each state. A tax rebate that is higher for lower income families would mitigate the tax burden
for these families. d Getting rid of the IRS in this case could save millions of dollars but would make
this kind of taxation harder for families because they will have to go through more agencies instead
of a single IRS.
I read about VAT, or value added tax and can see the appeal. The idea of placing a flat tax on
purchases to increase revenue for the country is a great idea. VATs are the third-largest source of
revenue for other member countries in the Organisation for Economic Co-operation and Development
(Dore, Kate, 2021). However, the only way I could see it even possibly working would be to lower
income taxes. Especially now with the increase in pricing and so many lower income families
struggling. It would be hard to put VAT into place. Any Presidential candidate to mention this in their
election campaign would cause lots of trouble for themselves. US Citizens are not going to want to
increase the amount of taxes they see come out of their purchases. In Virginia, we already pay an
average of 5.3% sales tax on purchases, an additional 5% in certain city jurisdictions and a 1% tax on
food and personal hygiene items Virginia Tax, 2023).
Dore, CFP, K. (2021, June 21). The value-added tax brings in billions for other countries, but the U.S.
doesn’t have one. CNBC. Retrieved April 2, 2023, from https://www.cnbc.com/2021/06/21/this-tax-
brings-in-billions-worldwide-why-theres-no-vat-in-the-us.html
Retail Sales and Use Tax (April, 2023). Virginia Tax. Retrieved April 2, 2023, from
https://www.tax.virginia.gov/retail-sales-and-use-tax
Kurtzleben, D. (2013, January 25). Commentary: Why the U.S. Should Adopt a Value-Added Tax
[Review of Commentary: Why the U.S. Should Adopt a Value-Added Tax]. US News.
https://www.usnews.com/news/articles/2013/01/25/commentary-why-the-us-should-adopt-a-value-
added-tax
FairTax FAQ. (2023, January 25). Tax Foundation. https://taxfoundation.org/fair-tax-national-sales-
tax/
Kurtzleben, Danielle. “Commentary: Why the U.S. Should Adopt a Value-Added Tax.” U.S. NEWS,
13 Jan. 2013, https://www.usnews.com/news/articles/2013/01/25/commentary-why-the-us-should-
adopt-a-value-added-tax.
Woodall, Rob. “H.R.25 - 114th Congress (2015-2016): FairTax Act of 2015.” CONGRESS.GOV, 6
Jan. 2015, https://www.congress.gov/bill/114th-congress/house-bill/25.
