Question

At least one page per question

1) Describe a flat tax system

2). Describe seven types of taxes that are imposed upon citizens of the United States.

Describe each of them.

Answer 1

The flat tax is a federal income tax system that applies the same low rate across the board. Its success depends on the tax rate proposed. It must take in enough revenue to fund the federal government. Most flat tax systems also allow exemptions for those living below the poverty line. As a result, each flat tax proposal must be evaluated carefully to assess its true revenue producing potential.

Advantages

A flat tax would have three advantages.

1. Simplicity

The biggest advantage is simplicity. The current U.S. tax system is so complicated that it costs taxpayers a lot just to implement it.

2. Improved fairness

The second advantage is improved fairness. The current tax system is subject to interpretation. For example, a fictional tax return given by Money magazine to 50 tax preparers resulted in 50 different tax calculations. Even a Treasury Department study found that callers to the IRS toll-free help lines got the wrong answers 25 percent of the time. So those with the most sophisticated tax preparers pay the least in taxes. That can increase income inequality.

3. Compliance

All this complexity allows greater fraud and cheating. The simplicity of a flat tax would improve

Disadvantages:

The flat tax has four disadvantages

First, most proposals don't replace the revenue from the existing tax system. Most flat tax proposals don't replace existing Federal revenue. That's because the rate would be too high. As a result, they increase the national deficit and debt.

Second, the flat tax must address payroll taxes that support Social Security and Medicare benefits. That's an income tax administered by employers. If the flat tax eliminates it, then a third of federal income is removed. The flat tax rate must increase to control the deficit. If the flat tax keeps the payroll tax, then a lot of complexity remains in preparing tax returns.

Third, it still leaves in place all state and local taxes. Most families and businesses must still spend almost the same amount of time to figure out their local tax bill.

Fourth, it imposes double taxation on seniors. They've paid taxes on their income all their lives. The flat tax would require them to spend a portion of this after-tax income on a new cost. They don't receive as much advantage from the elimination of the income tax.

b) Types of taxes that are imposed upon citizens of the United States

Income tax: The federal government of US collects tax on your income.Most states and some local govt. have their own income taxes.

Sales tax: Sales tex is charge on every purchase but tax rates vary among different states and few states have no sales tax.

Property tax : you will be charged property tax based on assessable value of property.Tax authority will assess property value.value of property is higher or lower based on the real estate market.

Estate tax or Gift tax : If you leave behind more property than the standard limit or want to give away property when you are live ,your heirs will have to pay heavy taxes for this.These are called estate tax or gift taxes

Hotel tax : Most hotel charges tax in the top of their regular room rent . Some hotels charge luxery tax .Tthese taxes up to 25% of total bill amount.

Sin tax : Tax is charged on items like Cigarettes and alcohol are subject to much higher tax rates . This is to help discourage people from consuming such items.