Suppose the United States were to convert its tax system from an income tax to a flat tax. For individuals, there would be no itemized deductions allowed, a high standard exemption (thus low income taxpayers would not have to file returns), and tax exemptions for dividend and interest income. Businesses could deduct all expenditures on salaries and immediately expense asset acquisition costs. Would such a tax system eliminate incentives to shift activities (a) from one period to the next, (b) from one type to another, and (c) from one pocket to another? Do you believe a flat tax with no itemized deductions is politically feasible in the United States?
Answer to relevant QuestionsAssume you are an individual taxpayer. If you expected your marginal tax rate to decline in the next period, what tax planning might you undertake in the current period? What incentives exist for taxpayers to shift income from one party to another? Are there costs associated with such income shifting? Give examples of such costs in a family planning situation. How would the elimination of ...A taxpayer owns and operates an art gallery with a large inventory of paintings held for sale to customers. She took one of the paintings home and hung it in her dining room. A week later, a dinner guest liked the painting ...The CEO of ABC Corporation is a dog lover. He and his spouse like cocker spaniels and have a purebred male cocker spaniel. Because of their love for dogs, they decide to breed and sell cocker spaniel pups. In the first year, ...Why do rising tax rates make single premium deferred annuities and pension accounts less attractive relative to ordinary money market accounts than when tax rates are falling?
Post your question