1. High administrative costs and low levels of compliance, the complexity of the tax code, the perceived inequities of the tax structure, and the large distortions that some argue are associated with current marginal tax rates, all have contributed to the impetus for tax reforms.
2. Many of the problems of the income tax system have arisen because too much has been asked of it. It was supposed to provide economic incentives (e.g., to invest, to save, to encourage health insurance, to support state and local governments) and redistribute income, as well as raise revenue.
3. The 1986 Tax Reform Act decreased the highest marginal tax rate, removed those in poverty from the tax rolls, and made tax avoidance more difficult. However, most Americans …show more content…
The 1993 ta bill increased progressivity by increasing marginal tax rates on the highest-income individuals and substantially increasing the earned income tax credit. As a result, the goal of ensuring that all families with one full-time earner would be out of poverty was almost attained. The 1997, 2001, and 2003 tax reforms reduced progressivity by restoring preferential treatment of capital gains, most of which accrue to the very wealthy. The 2003 tax bill further reduced progressivity by lowering taxes on dividends.
6. The 1993 and 1997 tax laws introduced special provisions for investments in small and new businesses, expanded IRAs, introduced new tax credits for education, and increased the child care credit.
7. In the current political climate, tax laws are being used to encourage specific activities (e.g., acquiring education) through tax expenditures because increases in direct expenditures are hard to obtain, and as an expression of values (e.g., encouraging families) by eliminating the marriage penalty and encouraging adoption.
8. Other major thrusts of tax reform under the current system include those to promote savings and simplify some of the provisions contributing to tax complexity.
9. Major reforms include taxing energy (carbon) usage or other activities detrimental to the environment, as well as taxing financial institutions and transactions. Other reforms include the flat tax, the value-added tax, and basing taxes on consumption rather than
2. Many of the problems of the income tax system have arisen because too much has been asked of it. It was supposed to provide economic incentives (e.g., to invest, to save, to encourage health insurance, to support state and local governments) and redistribute income, as well as raise revenue.
3. The 1986 Tax Reform Act decreased the highest marginal tax rate, removed those in poverty from the tax rolls, and made tax avoidance more difficult. However, most Americans …show more content…
The 1993 ta bill increased progressivity by increasing marginal tax rates on the highest-income individuals and substantially increasing the earned income tax credit. As a result, the goal of ensuring that all families with one full-time earner would be out of poverty was almost attained. The 1997, 2001, and 2003 tax reforms reduced progressivity by restoring preferential treatment of capital gains, most of which accrue to the very wealthy. The 2003 tax bill further reduced progressivity by lowering taxes on dividends.
6. The 1993 and 1997 tax laws introduced special provisions for investments in small and new businesses, expanded IRAs, introduced new tax credits for education, and increased the child care credit.
7. In the current political climate, tax laws are being used to encourage specific activities (e.g., acquiring education) through tax expenditures because increases in direct expenditures are hard to obtain, and as an expression of values (e.g., encouraging families) by eliminating the marriage penalty and encouraging adoption.
8. Other major thrusts of tax reform under the current system include those to promote savings and simplify some of the provisions contributing to tax complexity.
9. Major reforms include taxing energy (carbon) usage or other activities detrimental to the environment, as well as taxing financial institutions and transactions. Other reforms include the flat tax, the value-added tax, and basing taxes on consumption rather than