United States Tax Policy Essay

2474 words - 10 pages

United States Tax Policy

Throughout history, taxation on United States citizens has proven to be a necessary component of a growing economy as means of generating revenue for the federal budget. The federal budget funds the many government programs implemented to keep the disabled, elderly, and unemployed from falling bellow the poverty level. Unfortunately, this fund is not always available when catastrophic evens, such as an economic recession, deplete the revenue coming in and create a budget deficit. In order to regenerate money coming in and replace the deficit, the government calls on money gained from taxes. What happens when tax money is already appropriated to other programs? A tax reform. A tax increase has many times been the government's remedy to a budget deficit; however, this puts a strain on the taxpayers. Of course the financial burden is not equal across the board, as some taxes withhold more money from some individuals than others based on the nature of the tax. A progressive tax takes a larger percent of income from those in high-income groups than those in low-income groups. A progressive tax system, such as the United States Federal Income Tax might tax low-income taxpayers at 10%, middle-income taxpayers at 15%, and high-income taxpayers at 25%. A regressive tax charges everyone, regardless of income, the same dollar amount. This may seem fair, but in actuality, it requires lower-income individuals to pay a much larger portion of their income. For example, a $500 licensing fee is 10% of a $5,000 income, where it is only 1% of a $50,000 income. A proportional or flat tax requires every taxpayer to pay the same fixed rate. If a 10% state sales tax was passed, low, middle, and high-income taxpayers would all pay 10% on purchases. Like a regressive tax, a flat tax takes a larger portion from lower-income taxpayers. Clearly regressive and proportional taxes present a growing problem in regard to rising poverty rates in the United States.

Conservative vs. Liberal Ideology

As with any government program, the type of tax imposed on the taxpayers depends on the political group currently controlling the government. With a republican president in office, we are seeing the effects of the conservative philosophy: cut taxes and limit government involvement, thereby decreasing poverty by stimulating economic growth. Earlier in his term, President George W. Bush passed a major tax cut with this rational guiding his tax policy:

"Lower income taxes for all, with the greatest help for those most in need. Everyone who pays income taxes benefits - while the highest percentage tax cuts go to the lowest income Americans. I believe this is a formula for continuing the prosperity we've enjoyed, but also expanding it in ways we have yet to discover. It is an economics of inclusion. It is the agenda of a government that knows its limits and shows its heart." -President George W. Bush1

This may sound like a tax plan that will relieve...

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