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Second in a Series Understanding the Great Income Tax Debate

11/10/2011 09:31:00

Second article in a series Understanding the Great Income Tax Debate

The primary purpose of the tax system is to collect the revenue needed to fund the operations of the federal government, including its promises and commitments.

Whether the resources to fund government spending are provided through taxes or borrowing has consequences for the economy and the federal budget.

Ones view of the tax system is based on subjective judgments about the fairness of the distribution of tax burdens. Taxes impose efficiency costs by altering taxpayers behavior, inducing them to shift resources from high valued use to lower valued uses in an effort to reduce tax liability.

The criteria for a good tax system are: Equity, economic efficiency, simplicity, transparency, administrability,and transition. Designing tax policy requires making trade-offs among these criteria. For example, a proposal to improve the efficiency and simplicity of the tax codes may involve eliminating exemptions and deductions originally introduced to improve the equity of the system.

Because moving to an alternative tax system creates winners and losers, transition rules may be included in the tax reform proposals to mitigate some of the windfall gains and windfall losses that are likely to occur.

The Great Income Tax Debate - Should the wealthy pay more

11/07/2011 14:00:00

The Grate Income Tax Debate - Should the wealthy pay more

The debate surrounding whether high income taxpayers should pay more is as old as the tax code itself. As a first step in determining if any change is even possible is to understand the debate itself. I hope you will stay with me in this seriesof articles. At the end of the day, it is unlikely that we will have an answer but perhaps we will be better informed when it comes to evaluating proposals and better informed when voting time rolls around.

Concerns about the economic effectiveness, fairness, and growing complexity of the current tax system raise questions about its credibility. These concerns have led to a growing debate about the fundamental design of the federal tax system. The debate includes the type of base-income or consumption –and the rate structure-flatter or more progressive. Additionally, some question to what extent and how the tax system should be used to influence behavior and social policy. Agreement is of course hard to come by if not just plain impossible.

One thing that most seem to agree on is that absent policy changes, the federal budget is on an unsustainable path. Known demographic trends and rising health care costs will cause ultimately unsustainable deficits and debt that will threaten national security as well as the standard of living for the American people in the future.

Pay the least amount of taxes as the law allows

10/29/2011 07:17:00

Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. Former Appeals Court Judge Learned Hand

With this in mind, and with two months of the year remaining, now is a good time to review ones tax affairs going into the next year. Tax planning I believe is the term.

Consult your tax advisor.

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10/27/2011 15:45:00

I just made changes to my website. Please review and give me feed back on what else I could include that would be helpful to you. Thanks Ed Simpson