Comparing And Contrasting United States And International Tax Systems

1040 words - 4 pages

Tax SystemsThe most important source of a government's spending money is the taxes it collects from its people. There are a number of different systems a government can use to collect taxes. A few of the most common systems are national sales tax, flat tax and marginal tax. National sales tax is a system in which the tax is on goods people buy, and the revenue goes to the government. Flat tax is a proportionally equal income tax imposed on all citizens. A marginal tax system, which the United States uses, places taxpayers into brackets by income. The percentage of income taxed raises in each bracket.The way a government taxes its people is often definitive of the way that government operates. Many people feel very strongly that one system or another is the ethical or fair way to collect taxes. Each system certainly presents fairness in at least some way. At the same time, every tax system has its unfair qualities. However, fairness is not the only factor to consider about when comparing tax systems. Additional factors include complexity and efficiency, as well as the incentive or ability to cheat the system.Efficiency is an important factor to the government collecting the taxes because an efficient tax system results in maximization of tax revenue. National sales tax is an efficient system. Efficiency is this system comes from the people's incentive to work harder. By making more money, they are not necessarily increasing the amount of tax dollars they have to pay, but they are subject to Adam Smith's "invisible hand" of economics and increase productivity in the economy. The people benefit because the only way a person pays more taxes is by spending more on goods or services. Flat taxing is efficient as well. Similar to national sales tax, a flat tax does not depend on the amount of income the taxpayer receives. All taxpayers pay the same flat rate. The workers have incentive to work more or harder and make more income because each additional dollar they make is being taxed the same as last one. Conversely, a marginal tax is not as efficient. Taxpayers' incomes are broken down into brackets and taxed progressively higher in each bracket. This does not create any incentive for the people to make more money, because the next additional dollar they make may be subject to a higher tax rate.Fairness is definitely something to consider when comparing tax rates. It is also a widely debated issue to define precisely what is fair and unfair in taxation. To use a phrase from class, marginal tax systems are the most ethical from a "Robin Hood" point of view. That is, the rich pay more taxes than the lower-bracket income groups. The flat tax system can be seen as fair as well, since everyone is taxed the same flat rate. It is less fair, though, because the income still produces the tax. The national sales tax is least fair. It is more difficult for individuals who make less money to pay a heavy sales tax on goods and services at the poverty level....

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