Question

As a newly minted CPA, you obtain your first significant position as a tax professional: senior tax accountant for one of the offices of a regional accounting firm. Of course, the firm runs a notice of your hiring in the local newspaper. A few days later, the editor of the newspaper calls you and asks if you might be interested in writing a monthly column for the newspaper on tax issues. Figuring that it would be a good way to get your name out in the community as an expert in the field (and a little free advertising to boot!), you tell him that you would be more than happy to do so. "Great! " he says. "By the way, I have already blocked out space for this column in the next edition of the paper. Is there any way that you can get me your article by the end of the day today?" After you commit to doing so, he also proceeds to tell you that you will not be paid for these articles. "I figure that it is just a sort of public service that you could offer to the community. I am sure you understand." (And so it begins...get used to a lot of this.) You spend the next 10 minutes thinking about what you could discuss in your first article. You would like to shake people up a little bit, and perhaps challenge their opinions about some issues of tax law. That way, you could perhaps build up some interest in your column, which, as you know, will be difficult to achieve under the best of circumstances! (After all, who wants to read newspaper articles about taxes?)

Finally, you decide on a topic: You will argue to the readers that the federal income tax should be abolished and replaced with a national sales tax. Required: Write an article arguing this position. You may or may not agree with this proposition. However, based on the materials covered in this course and the discussions that have occurred in the Discussion areas, you should be able to articulate a cogent, persuasive argument in support of this proposition. In particular, you should focus on reference theories, concepts, justifications, and anticipated economic, social, and/or other benefits that would result from such a system. To the extent that you think strong contrary arguments could be made, consider raising those contrary arguments and then persuasively arguing against them.

Your answer to this question will be evaluated based on the thoroughness, professionalism, substance, and persuasiveness of your argument.

Answer 1

Answer:

Income taxes are taxes that are levied as a percentage of income, have the virtue that people will actually have the money to pay them. Current USA income tax brackets are progressive and effective tax rate for highest slab rate is 40%.

National property tax would increase taxes on the poor less and increase taxes on the rich more while decreasing taxes on the middle class who bear most of the tax burden in income tax system. But this theory will hold true when there is high positive connection between income of people and its property investments.

Otherwise there will be unbalanced tax burden on taxpayers. Person with very high income with low property investments will pay marginal higher tax compared to middle class income people.

It is also more difficult to cook the books on real estate compared to income or sales taxes. All the information is public and the property cannot be hidden or moved offshore. But there may arise issue related to valuation of property.

Another issue with property taxes is that owner might own property which is appraised at a high value but not necessarily derive any income from that property. Property taxes can thus really energy suburban sprawl. Property tax will skew an economy in favor of economic activity that does not use a lot of land or more use of lower value land. So Property taxes are good when government wants to develop semi urban or village areas.

But it is also unfair to farmers and lower income class living in villages for forcing to pay more tax due to some transportation developments happened in nearby surrounding areas of village. But Farm land, seniors, and homeowners may be allowed to get exemption to reduce their tax burden due to owning non-income producing property.

Replacing the income tax with a property tax would change people's behavior. With an income tax, your tax increases as you earn more, but earning more still gets you more, so it's worth it. With a property tax, a specific behavior that is investment driven is discouraged. There is no guarantee that people could afford a high property tax on their home and taking trillions in tax revenue solely from real estate may hugely disfigure the market which will have wide-ranging consequences.

There are other issues related to tax liability in case of rental properties in places like New York & other urban areas where lot of people don't own property.