What are the objectives of a tax system? What makes a tax system complicated? Describe, in...

 

Transcribed Image Text:

What are the objectives of a tax system? What makes a tax system complicated? Describe, in sufficient detail, the following major tax reform plans: a. Flat Tax b. Fair Tax c. Competitive Tax (suggested by Michael Graetz) Discuss the pros and cons of each of these plans. List, in bullet-point form, at least 5 pros and 5 cons for each plan. What are the objectives of a tax system? What makes a tax system complicated? Describe, in sufficient detail, the following major tax reform plans: a. Flat Tax b. Fair Tax c. Competitive Tax (suggested by Michael Graetz) Discuss the pros and cons of each of these plans. List, in bullet-point form, at least 5 pros and 5 cons for each plan.

Answer rating: 100% (QA)

The following questions are given below 1 The primary purpose of taxation is to lift revenue to fulfill large public expenditure Most governmental activities should be supported by taxation however its not the sole goal In different words taxation policy has some nonrevenue objectives Objectives of tax system are 1 Economic Development One of the vital objectives of taxation is economic development Economic development of any country is essentially conditioned by the expansion of capital formationIts aforementioned that capital formation is that the kingpin of economic development However LDCs sometimes suffer from the shortage of capital To overcome the scarceness of capital governments of those countries mobilise resources in order that a fast capital accumulation takes place To maximize each public and personal investment government faucets tax revenues Through correct tax coming up with the quantitative relation of savings to value is raised 2 Full Employment Second objective is that the financial condition Since the amount of employment depends on effective demand a rustic hungry of achieving the goal of financial condition should bog down the speed of taxes Consequently income can rise and hence demand for product and services can rise accrued demand can stimulate investment resulting in an increase in financial gain and employment through the multiplier factor mechanism 3 Value Stability Thirdly taxation are often accustomed guarantee value stabilitya short run objective of taxation Taxes square measure considered a good suggests that of dominant inflation By raising the speed of direct taxes nonpublic underpayment are often controlled Naturally the pressure on the artefact market is reduced But indirect taxes obligatory on commodities fuel inflationary tendencies High artefact costs on the one hand discourage consumption and on the opposite hand encourage saving Opposite result can occur once taxes square measure lowered down throughout deflation 4 Management of alternate Fluctuations Fourthly management of alternate fluctuationsperiods of boom and depressionis thoughtabout to be another objective of taxation throughout depression taxes square measure lowered down whereas throughout boom taxes square measure redoubled in order that alternate fluctuations square measure tamed 5 Reduction of BOP Difficulties Fifthly taxes like custom duties are accustomed management imports of sure product with the target of reducing the intensity of balance of payments difficulties and inspiring domestic production arch substitutes 6 NonRevenue Objective Finally another extrarevenue or nonrevenue objective of taxation is that the reduction of inequalities in financial gain and wealth this will be done by burdensome the wealthy at higher rate than the poor or by introducing a system of progressive taxation 2 Tax makes a complicated such things are COMPETING GOALS FOR A LEGAL SYSTEM Most people believe taxes ought to be honest tributary to economic prosperity and enforceable yet as straightforward however even people that agree on these goals usually disagree regarding the relative importance of every As a result policies typically represent a balance among competitive goals and ease usually loses dead set alternative priorities For example most countries tailor tax burdens to individual taxpayers characteristics which will create taxes fairer however a lot of complicated financial gain must be copied from businesses to people Individual characteristics like legal status and range of dependent yet because the composition of expenditures or financial gain ought to be rumoured and documented These conflicting objectives seem to be particularly relevant within the current tax code wherever the will to scale back tax burdens for specific teams have added important quality POLITICS OF TAX PROGRAM Politics compounds quality Interest groupsand so politicianssupport tax subsidies for specific activities And these targeted subsidies inevitably complicate the legal system by making distinctions among taxpayers with completely different sources and uses of financial gain EFFECTS OF PROGRESSIVE LEGISLATIVE CHANGES The current law wasnt enacted all promptly however could be a results of various provisions added or ablated in multiple tax bills usually Congress styles legislation beneath voluntary constraints like shortrun revenue goals or effects on the distribution of tax burdens among financial gain teams The results that tax incentives are usually designed in complicated ways in which to limit the revenue losses or advantages to highincome taxpayers or to stop their use by uncased beneficiaries The results of this method could be a set of terribly complicated provisions that seem to possess no overall logic if the law were being designed from scratch These embrace phaseouts of sure tax advantages at high incomes multiple incentives for teaching and retirement savings multiple advantages for taxpayers with dependents with completely different eligibility definitions and a completely separate tax schedule the individual various minimum tax that applies to sure taxpayers victimisation selected tax preferences The Tax Cuts and Jobs Act of 2017 considerably reduced the amount of taxpayers subject to the choice minimum tax through 2025 and by raising the quality deduction and capping the state and native deduction reduced the amount of taxpayers WHO enjoy itemized deductions however it ... View the full answer