Respond 3

Question 1

Taxpayers in the United States pay income tax based on progressive tax rates, that is, as taxable income increases, the tax rate on the additional income will also increase. Discussion of a flat tax on income periodically arises, typically, in election cycles.

Discuss whether or not you think that an income tax system that uses a flat tax rather than a progressive tax will mean a fairer and more equitable tax system for all taxpayers? Be sure to thoroughly explain your position.

Using the Internet put together a list of proponent's and opponent's reasons for supporting a flat tax.

Respond to this… It seems to hold true that during election cycles “tax” debates are often held. I believe it was Herman Cain who wanted to implement his 9-9-9 tax system which was version of a simplified flat tax. Overall I am a proponent of the progressive tax system simply because I feel that it stimulates the economy better and the 85% of Americans that fall in the lower income groups do not get taxed as high as those who have higher earning salaries.

The pros for a progressive tax are that lower to middle incomes are taxed at lower rates than those who earn higher salaries. Since the majority of the US taxpayer’s fall into the lower to middle income range many feel it is in the countries best interest to keep a progressive tax system. Additionally and as mentioned above it could be catastrophic if low income earners were taxed more than they are now since many are barely getting by and higher taxes could be too much of a burden on them. The cons of the progressive tax system are simply “is it fair”? That question is one that is difficult to answer especially in a capitalistic environment. This is why we see so many “social” objectives relating to tax credits and deductions on what we feel benefit humanity. Being an accountant I look at material issues and if someone made $30,000 and was taxed at 25% they would only net $22,500 of this while the same personwho made $3,000,000 would net $2,250,000. I know that the first person would feel the pinch much more if taxes rose than the second.

The pros and cons for flat tax are simply that flat taxes are simple. The flat tax across the board is the same for everyone. The cons however are as stated above which potentially can cripple economies since the majority of the consumers fall in the low and middle classes. If low to middle class earners are taxed too high they will not spend the necessary money back into the economy that drives businesses every day.

Again this can tend to get extremely political however the “fairness” on this subject is very debatable. Overall the flat tax is simple however the progressive system I feel is much fairer when calculated and also assists the economy since lower income individuals who have lower taxes can continue to spend money within the economy on much needed life essentials.

References

http://www.forbes.com/sites/robertwood/2011/10/20/flat-fair-and-progressive-taxes/#32a35fb81d00

Question 2

Read the following scenario, and use the information to help you answer the discussion questions that follow:

Scenario: You are a newly elected County Auditor. As part of your new position, you now control a 30 million dollar budget for the county. Before any claim can be submitted to the county commissioners for payment, it is your responsibility to review and approve the claim. In the first batch of claims you receive, there are expenditures for a Christmas Party given to employees of the Road Department. The expenditures were not approved by you, but were approved by the previous auditor. Hence, the payment was authorized by the County Commissioners. Hint: Keep in mind that all county funds are taxpayer’s dollars.

Based on the scenario above, what would you do? Ethically, do you feel you should abide by the approval? Would you just make the payment? Explain your reasoning.

Respond to this… Ethically, I feel that I could not just go ahead and approve and make the payment, some research, I feel would be necessary. Personally, I feel that a Christmas party for the employees of the road department is not an appropriate use of the county funds.  I feel that it would be a different situation if the Christmas party was open to the public.  I would also wonder and see if this has happened in the past and if it has than what was the budget, did it go through the proper approvals? I would take all of this into consideration and I would speak with the County Commissioners

Question 3

If risk wasn't sufficiently rewarded do you believe investors would still invest? Please explain. How does expanding one's "portfolio" potentially reduce risk?

Respond to this… Investors are great businesspeople will take lots of risks to reach the jackpot. Ambition gives the advantage to many people who will want to try risk in different versions, such as gambling, lottery, and other legal competition places. Bonds and stocks are part of the risk in business for many investors. If the risk wasn't sufficiently rewarded, I don't believe that investor would take their time to invest in the risk. The gambler must be smart enough to play chess with other players, and they are required to know the rules of the risk. Everyone is looking for the jackpot that could be interested in many of the investors. Working hard with the correct rules that can guarantee big prizes to fulfill investor's need. If we look at every business, we noticed that risk is everywhere (Casino, Firms, Small businesses, Farmers market). As a result, it doesn't mean that having a bigger portfolio will reduce risk. Only a portion of the risk will be compensated.

I assume that investors can measure portfolio risk to predict financial health and return. "The standard deviation of an investment's expected return is considered a basic measure of risk. If two potential investments had the same expected return, the one with the lower standard deviation would be considered to have less potential risk."

Source:

http://www.investopedia.com/exam-guide/series-66/portfolio-risks/measuring-portfolio-risks.asp