eng final

1

Should Taxes on People Making over $ 250,000 a Year be changed?

Eng 215

Part I: Revision of ‘A Problem Exists.'

Introduction

Over the last few decades, the issue of taxation has been a key problem in the presidency. There have been presidential candidates promising to increase taxes to individuals and businesses, while other have focused on removing taxes in some areas of the economy and for specific income groups (Heim, 2012). One of the key figures in the debate has been $250,000 for couples and $200,000 for singles. The United States government under different administration has proposed different stances on these taxing policies. This paper presents the underlying issues in the taxation provisions made under different administrations. Specifically, the paper presents the details of the debate about taxing those making more than $250,000 annually.

Overview of the Problem

President Bush implemented a policy that exempted tax for married couples earning less than $250,000, and singles making less than $200,000. The following administration led by President Obama wanted to get rid of this policy. Further, the current administration led by President Trump intends to make comprehensive changes to the tax policies used within the country. Although these assertions appear simplistic, making changes to the federal income tax code is complicated. For instance, the tax cuts introduced by President Bush consisted of many reductions including marginal rate cuts, dividend income tax cuts, and capital gains tax rate reductions.

The move to make tax cuts and changes is complicated to complete. It is important to determine the effect that such changes will have, and this is one of the biggest challenges (Heim, 2012). Taxation has a significant impact on the economy. It is almost impossible to make accurate predictions on the future state of the economy, and hence it is virtually impossible to determine the effect of changes in the federal income tax code. As a result, it 's hard to determine whether the taxes of people making over $250,000 should be modified.

Key Problems

Although the final changes have not been agreed on, there is a lot of support for changes to be made to the federal income tax code. In the paper, the main question is whether these changes should be done. As a result, many different challenges would be expected.

Defining $250,000

One of the major challenges that result from the move to introduce tax changes is the definition of the caps. As is in this paper, two of the major figures determining the changes to the tax policies are $250,000/$200,000. President Bush initially made these figures relevant by introducing the tax cuts for married couples earning less than $250,000, and singles earning less than $200,000 annually. However, the value of money does not remain constant, and these figures do not represent the same amount of earning today (Raskolnikov, 2009).

One of the major challenges that currently exist is in determining whether $250,000/$200,000 should be the cut-out as before. As a result of inflation, the same figures used by President Bush and President Obama have now changed to $267,000 for married couples and $213,600 for singles. In determining whether tax changes should be performed, inflation will be one of the primary considerations (Raskolnikov, 2009).

Disposable Income

The debate on taxes has been contentious because of the well-being of taxpayers. According to some scholar, people earning about $250,000 annually pay half of the money in the form of taxes. They have to pay their bills and make a living from the remaining amount. According to some members of Congress, this remaining amount is insufficient for families that may be paying college and mortgage bills (Gemmell, 2012).

In a bid to mind the welfare of American taxpayers, the question on whether to make changes for people making over $250,000 need to consider the disposable income. Changes made to the federal income tax code have a profound impact on disposable income. The amount of money available to individuals has to be adequate to cover acceptable bills such as power bills and school fees. One of the viewpoints taken by those advocating a cut in taxes for those making less than $250,000/$200,000 yearly is that they do not have the means to cover their needs (Gemmell, 2012). As a result, the debate on whether such changes should be made primarily depends on determining whether Americans have adequate disposable incomes when such changes are implemented.

Impact on Economy

President Trump has promised a lot of changes to the federal income tax code. However, there has been a lot of resistance from inside, and outside the administration. A lot of the concerns relate to the impact of such changes on the economy. Taxation has been a primary tool used to determine the direction that an economy takes (Heim, 2012). Some industries are afforded tax cuts to facilitate growth, while taxation is used to discourage the growth of certain industries such as the one of tobacco. To plan on making a decision on whether changes should be made to tax policies, it is important to determine the impact such changes will have on the economy.

The problem in this instance is that it is almost impossible to make a final estimate. The federal income tax guideline is very complicated and consists of numerous provisions that must be met (Heim, 2012). For the most part, the impact of such changes has been left to politicians. It is a debate that is typified by sound support and opposition. Those making a case for the changes put forth convincing evidence that is closely matched by those opposing such changes. As such, it is necessary to gather more information about the effects of making changes to the tax guidelines on the economy.

Conclusion

Making changes to the federal income tax code has been used to stimulate growth in the United States for some time. It has been an issue of interest and concern among those involved as it has great impacts on different sectors. Various government administrations have promised to provide the best tax options to the country, but have faced stiff opposition. The objective of this work was to determine whether it would be an appropriate option to make changes to the tax code. There are major considerations to be made. One of the major issues was that inflation has a profound impact on the fiscal policies. As inflation is inherent in the prevailing economic model, the tax policies used to take this into account. Another area of concern is that changes in the tax code have to take account of the amount left for taxpayers. This amount has to be adequate for them to cover all their essentials. Finally, the impacts of these changes on the economy need to be well understood, or there could be undesirable outcomes.

Part 2: Solution to Problem and Advantages

The United States government under different administration has proposed different stances on taxation policies. One of the key figures in the debate has been $250,000 for couples and $200,000 for singles. While some people argue that the government should cut taxation on low-income people, others consider that it should levy the tax on all income earning citizens. The thesis of this paper is; it is necessary to cut tax for residents who make less than $250,000 per year to promote equity, improve living standards, and develop the economy.

This paper proposes that the government should cut the tax on people who earn low incomes as a way of promoting equity. When the government tax high income earning individuals, and cut a tax on the low-income persons, it will be trying to level the net income of these two groups of people. Also, the low-income individuals will have increased spending ability that will enable them to purchase the needed goods and services to improve their living standards. On the other hand, increased disposable income will increase demand for goods and services. This can promote trade and productivity leading to an improved economy.

Advantages of the solution

Increased disposable income

It would be important to levy income tax on people who earn more than $250,000 annually to increase the level of disposable income for the people with low income. The citizens who earn less than $250,000 per year spend a significant proportion of their income on bills and to make a living compared to the people with large incomes. When they're subjected to taxation, the situation becomes worse as this reduces the amount further and makes it difficult to earn a living. By removing the tax on people with less than $250,000 per year, the government will be exercising its moral duty and social responsibility of taking care of the welfare of its low income earning people. On the political front, the move will be beneficial to all citizens with low income regardless of the political affiliation. As identified by Gemmell (2012), the citizens who earn less than 250,000 annually do not have adequate resources to meet their needs.

Improved economy due to increased demand

Other than the disposal income, cutting income tax on people who earn below $250,000 annually can have a positive impact on the country's economy. Taxation has been a primary tool used to determine the direction that an economy takes (Heim, 2012). Some industries are afforded tax cuts to facilitate growth, while taxation is used to discourage the growth of certain industries such as the one of tobacco. To plan on making a decision on whether changes should be made to tax policies, it is important to determine the impact such changes will have on the economy. In this case, cutting tax on the low-income workers is an indication that they will have increased purchasing ability. As consumers, the increased disposal income will allow them to buy goods and services from the business people. As companies improve due to increased revenues, more employment opportunities can also be created. These will eventually translate to increased living standards for the people. Increased life come with other benefits such as adequate political participation and environmental consciousness.

Reduced gap between the rich and the poor

Cutting income tax on people who earn less than $250,000 per year can help in addressing the problem of increasing gap between the wealthy and the have-nots. Taxation is an effective way through which the government can redistribute resources and ensure equity in society (Bird, & Zolt, 2004). It can levy taxes on people with high incomes and use the collected revenues in providing services that are beneficial to everyone in society such as health and education services. In the same line, the tax levied on people with high income reduces their disposable income while the revenue for those earning less than $250,000 annually will remain the same when they don't pay income tax. As s result, even if not eliminated, there is a direct reduction of the gap between the disposable income between the low-income earners and the high-income earners. It is an ethical practice because the taxes levied on the high-income people are used for the benefit of everyone. Besides, the low-income individuals will also be required to pay tax if their income increases to a level where they can pay the necessary bills after paying tax.

Conclusion

In conclusion, it is important to acknowledge that taxation is an important instrument that the government can use to determine the kind of life that its citizens live. The government should use the tax policies for the benefit of all the people by ensuring that individuals who earn less in society are not subjected to the heavy burden of paying income tax. They can be given the opportunity to improve their lives as they work towards getting adequate income that would enable them to pay bills and get the daily needs. This can be done by cutting tax on the people who earn less than $250,000 per year.

References

Bird, R. M., & Zolt, E. M. (2004). Redistribution via Taxation: The Limited Role of the personal income tax in developing countries. UCLA L. Rev., 52, 1627.

Gemmell, N. (2012). Behavioral Responses to Taxpayer Audits: Evidence from Random Taxpayer Inquiries. National Tax Journal, 65(1), 33-57.

Heim, B. T. (2012). The Effect of Recent Tax Changes on Tax-Preferred Saving Behavior. National Tax Journal, 65(2), 283-311.

Raskolnikov, A. (2009). Revealing Choices: Using Taxpayer Choice to Target Tax Enforcement. Columbia Law Review, 109(4), 689-754.