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Assignment 3: Tax Reform - Essay Example

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Assignment 3: Tax Reform

Reducing the Tax Bite The tax impact on dividends as well as interest sustained in many ways like owning stocks in an account that is tax free, or by holding stocks that increase in value with time and pay no dividends. Tax Issues it is being argued that the tax structure enforces an extremely high percentage which makes it extremely difficult for corporation in the United States of America to attract investors and raise capital. This in turn has a linchpin affect because no new jobs are created and the entire economical development process is hindered. It is believed that the tax rate needs to be lowered from the current 35% to make the economy more sustainable. Tis argument is supported by the fact that tax rates in the U.S have been reducing for 30 years now but the corporate tax are at an all time high. They point out that in the last decade alone, many countries have reduced their corporate tax rate to make their economy more competitive. However, all is not sunny and there are several large4 companies, 1000 at least which are not paying their fair share of what they owe to the government in form of taxes. Critics argue that large corporation use their endless supply of resources to make unfair usage of tax shelters as well as find minuscule loopholes in the existing tax law to avoid paying the fair amount of tax. It is for this reason that amidst the extremely high corporate tax rate. The revenue generated by these corporate tax is constantly declining from a 6% of the economy in the 19th century to a mere 2%. On the other hand, returns that individual investors earn remain steady.    The way that these issues will be solved is at the moment not very clear even though what is certain over here is that corporate taxes are definitely supposed to be one of the federal legislative agenda particularly in the short term. There is a dire need to simplify the structure in order to highlight that the tax code simplicity is an overriding majority in the administration of taxes. The tax code that currently exists makes compliance difficult and also requires tax payers to spend an extra amount of time for preparation and filing of returns. It also obscures the level of comprehension which means that it leaves tax payers clueless about how the taxes and their rates are computed and applied in different situations, and what exactly is the role of the taxes that they pay. In addition to this, they also facilitate the avoidance of tax by ensuring that tax payers are able to reduce their tax liability to provide criminals with opportunities of indulging into tax related fraud. In addition it also gives the impression that tax payers are not compliant to rules and regulations which ultimately reduce the incentives that honest tax payers feel for the need to comply to these rules, and it makes them more de motivated and vulnerable to fraud. The report has also stated that tax codes impose a very high amount of burden on the tax payers. Since the year 2001, Congress has made several changes to the tax code at an approximate average of about one per day (Shaviro, 2011). Particularly, it has been pointed out that it takes the US tax payers to pay more than 6 billion US Dollars per hour for compiling the tax code in the year 2010, and it is also said that about nine out of ten Americans are reliant on professional or some kind of other commercial ...Show more


Taxes and Investors The interest charged by corporations is of great interest to the investors for this is means of raising capital with debt instead of equity. Nothing compares to the tan reduction of dividends that is paid to the shareholders. Tax on dividends is paid twice, once by the corporation and then by the shareholder himself…
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Assignment 3: Tax Reform essay example
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