Before you read this, the first four paragraphs are simply defended and explaining  though history and logic, why the two tax codes at the bottom would work. If you would just like to look at the tax rates, go to the bottom of this and read  under the subtitles: Flat Tax and Progressive Sales Tax. 

Starting from the late nineteenth century onward, taxation has presented new and more numerous complications. What started as a simple dispute over authority, transformed into a multi-complex controversy consisting of thousands of tax codes—developed through political and economic ideologies in correlation to cooperate interest. Throughout this essay three issues of taxation which seem the most controversial and likely the most important, shall be discussed: high verses low tax rates, tariffs or free trade, and income tax verses sales tax.  

            The first major dispute, resides between the merits of high and low tax systems. In a system which uses a high tax rate the government receives more money to spend on employment, education, security, and other government-run expenditures.  In a low tax rate, individuals have more money in their pockets make more purchases which in turn grows the economy; thus begins the abiding argument. While many cling to one end of the altercation and criticize the other, both rates have the potential to work well or fail miserably, dependent upon the way in which they are implemented. While there is a high rate, rich and powerful individuals have little problem finding loopholes and avoiding them. Loopholes can be found within the existing tax laws by hired lawyers and accountants. Although generally legal, many accuse the rich of manipulating the system and not paying their fair share. Ironically, the higher taxes are the less the rich end up paying. Many believe, regardless of the tax system, that certain individuals will be able to avoid taxes:  “Where there is an income tax, the just man will pay more and the unjust less on the same amount of income.”[1]  The best system for a high tax proposal is a flat tax for individuals making over a fixed income. A flat tax is a system in which one pays a fixed percentage of their income with no deductions nor exemptions. If developed properly, this form of taxation would be the simplest and most efficient way to close loopholes and diminish tax fraud. Low tax rates are a little more difficult to make efficient. Granted, there have been times in U.S. history when a low tax rate coincided with a booming economy. There is, however, no evidence which proves cutting taxes is responsible for this economic growth.  In today’s economy, low tax rates seem almost implausible due to the price of American made products. The money saved by Americans would likely go to foreign companies, boosting their economy rather than our own. 

            Another issue involves the advantages and disadvantages of tariffs and free trade. Presently, the United States has no tariff, quota, or other type of restriction on North American trade. This can be credited to the North American Free Trade Agreement signed by Bill Clinton. The goal of ‘NAFTA’ was to reduce inflation by means of decreasing costs of imports and exports. It also made gas prices cheaper by allowing us to get tariff-free oil from Mexico and Canada. While the advantages are indisputable, many believe NAFTA’s advantages are greatly outweighed by its disadvantages. American jobs were lost to Mexico and the average wage of American families suffered. In Mexico, over a million farmers became unemployed and in Canada, sales from oil were greatly diminished. Concerning international trade, countries which contribute to the majority of our sales such as China, pay minimal tariffs on items being shipped to the U.S. As a result, foreign made products sold in the U.S. are cheaper than American made products. While many popular items can be bought at low costs, American companies sell very little and the economy ceases to grow.  Unfairly, many of our exported products are subjected to high tariff taxes, making them difficult to sell in other countries. Japan, for example, places high tariffs on automobiles sold in their country in order to ensure domestic sales. During the nineteenth century, when taxes on foreign goods were imposed, competition was of little concern. The duties made American made products able to compete with other foreign made products, and also contributed to the majority of federal income.

Despite general success, there are better alternatives to our current system of income and sales taxation.  Presently, the federal government receives its money from deductions on individual’s income, while state and local governments receive money from assessment on purchased goods, utilities, and income. This is done through a tax system defined as a Progressive Tax rate. This means that the more income one has, the higher the tax percent. Likewise, the lower income one has the lower the tax percent. Simply, the rich pay more, the poor pay less. Unfortunately, due to the length and complexity of the tax code; the system does not work the way which it was intended. Those who would pay a high percent of their income end up paying a low percent while those who would pay a low percent’s often pay nothing at all; leaving the burden to the middle percent.  Although income tax has been in effect for over a hundred and fifty-years, many propose a change that is known as a Fair Tax. A Fair Tax is a code in which one pays no income tax. Rather, one rate would be applied to the purchases of goods and services, which would pay for both federal and local government spending. Another proposal is to remove the burden of sales tax and switch strictly to an income tax system. The best way in which a tax system such as this could work is through the states. Some states, such as Alaska and New Hampshire, currently have no sales tax and receive state revenue through other means. These states argue that the elimination of sales benefits low income citizens and increases the rate of purchasing. On the other hand, the money being saved on sales is deducted from state taxes which, arguably, amount to more than what is being saved.

                                                        Flat Income and Sales Tax.

            All things considered, the most efficient type of system would consist of eliminating sales tax, reforming to a flat tax rate, slowly raising levies on foreign goods, lowering cooperate tax rates, and reforming the cooperate tax code to close loopholes. While many have proposed such ideas, I offer more realistic suggestions as to how this system could actually work. First, the elimination of sales tax would have to progress very slowly, until eventually being replaced by income and tariff taxes. Secondly, business tax cuts must be conditional, offered only if government intelligence suggests a fixed increase of job creation. This is to say the higher the business employment rate is the more tax cuts the government would offer the company. Furthermore, the government should have power to stop tax cuts with probable cause. Thirdly, U.S. companies engaging in offshore manufacturing havens, should be heavily taxed on products sold in the U.S. Fourthly, the government should impose a seven to ten percent flat tax rate upon individual income. Lastly, cooperation tax should be split into two separate flat taxes for large and small businesses. Companies making above a fixed rate should be taxed between twenty and thirty-five percent, while companies making below the rate should be taxed between ten and fifteen percent. The delineation of this bill should be simple, and ideally, unavoidable.

                                                            Progressive Sales Tax

            Additionally, another tax rate which could work is the elimination of income tax completely, and a raise in tariff and sales taxation. By doing so spending would increase dramatically as would the economy. Basically, instead of giving money to the government to spend on the economy, the people would be giving money directly to the economy. Because of fluctuation in income, however, sales tax would have to tiers. For example, necessitates such as food, water, basic clothing, a family car, a small house etc. would have a low tax. Reciprocally, name brand clothing, a sports car, a large house, would have a higher tax. Even more so, a Ferrari  mansion, designer clothes would have an even high tax etc. This could be done in either three or five tiers in which the more luxurious the item, the higher sales tax parentage. This would also be the ideal, and perhaps only, way to tax the rich. (Read Plato quote in third paragraph) 



[1] Plato, and G. M. A. Grube. “Plato's Republic.” Indianapolis. Hackett Pub. 1974. Print.

 

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