It is a fundamental fact that people re taxed on their income as well as allowed access to credit on their allowances. “In the U.S., Taxes are imposed on net income of individuals and corporations by the federal, most state, and some local governments” (Forbes, 2005). In addition the country’s federal, state and local governments have jurisdiction n tax collection. The types of taxes imposed vary a situation brought about by constitutional jurisdiction. In view of this, Income taxes are imposed at the federal and most state levels wile property taxes are imposed on local levels.
In the U.S. the current tax system adopted by the country is described as ineffective going by the fact that some of the richest people in America pay no tax, while a huge share of the tax burden falls on ordinary citizens in the country who withstanding current circumstances do not have so much. Just by mere observation, we can therefore conclude that the current system in the country is not only ineffective but also complex. This is why shifting into a more simplified tax system would be the best alternative in order to solve tax crisis and issues in the country.
Under the current tax system, income tax is imposed based on the income of individuals, groups and major corporations. As observed by Evans, in some occurrences, tax maybe reduced by credits, some of which may be refunded if they exceed the tax calculated(Evans, 2005) The most fundamental fact under this is that Income and deductions are recognized under tax rules. However, the current tax system is seen as one containing many loopholes in the sense that it fails to address the issue of economic imbalance in the society. This is the main reason why the tax burden seems to fall on the individual who do not have so much to offer as compared to those who are capable of paying their taxes.
An alternative tax system would be a flat tax rate. What is referred to as a flat tax rate is the application of an individual or corporate income that is supposed to be taxed at marginal levels. Flat tax proposal have suddenly come back as more and more people are advocating for this system of tax administration. This is going by the fact that in most countries, the flat tax system has been proposed and is considered to be the most simplistic and effective method of tax administration. In the U.S. former House Majority Leader Dick Armey and Freedom Works tried to influence the Congress as well as the people in supporting the flat tax system under the (Taxpayer Choice Act). According to analysts, the countries that have recently adopted the flat tax system have done this with an overall objective of getting their economies back on track.
In the U.S., federal income tax is progressive in almost all the states in the country. However, some states have gone up to the extent of introducing their own tax systems with Pennsylvania having a pure flat tax with no zero-bracket amount. Other states in the U.S. such as Massachusetts and Colorado have their tax household incomes at a single rate, ranging from 3.07% to 5.3% respectively. In the world, today, it is claimed that the German tax system is the most complex tax system in the world.
Proposals over the introduction of a flat tax rate in the U.S. have been going of or over a decade now. During a previous debate, Jerry Brown, former and current Democratic Governor of California used the basis of a flat tax rate system as his main campaign strategy during his run for president in 1992. Some few years later, another presidential hopeful Tom Harkin made a similar proposal with regards to the current tax system in the U.S. despite the fact that neither of them made it to the presidency, their tax system proposal elicited a sharp debate regarding the current tax system in the U.S.
The debate surrounding the tax system in the U.S. is regarding equity distribution. “The question of fairness is centered on what tax deductions are abolished when a flat tax is introduced, and who is most affected by the abolition of those deductions” (Forbes, 2005). However, the controversy that exists in equity distribution is mainly centered on philosophical issues and fundamental implications. One of the major concerns regarding the flat tax system is that what may really loom like a flat tax system may not be a flat tax rate system. The fact that these systems end up not running as intended is why most people are concerned over equity distribution with respect to the flat tax system.