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General principles and concepts of taxation essay
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General principles and concepts of taxation essay
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Tax Law: A Broader Perspective
Accounting for Income Taxes
Taxes and the Law: A Broader Perspective
Taxes are everywhere and exist as a vital part of national structure, both legally and financially. Taxation influences everything from wages to inheritance. Given this, one is compelled to inquire as to how this balance works and what constitutes its existence. That is where understanding the effects of tax law and how they are accounted for have great import.
As with any other facet of life, rules accompany the application and processing of taxes, and how they are required to be paid. This sounds rather rigid, but there are many benefits to taxation as well as the normal mandatory sacrifices. This means that taxes can change to ease financial hardship just as they can be altered to increase individual expenditure. For instance, FS-2006-2 - Publication 4492 has created tax breaks for Katrina, Rita, and Wilma victims. Those who have been affected may now exclude from income certain cancellations of debt and extends, from two years to five years, the replacement period for converted properties.
At this point a logical question to ask is who governs taxation, and how are benefits and penalties decided? Modern taxation extends all the way back to Section I of both Articles 8 and 9 in the constitution, and has been heavily influenced by America's sixteenth amendment to the constitution.
Amendment sixteen gave Congress the power to tax any entity regardless of census or enumeration. At first glance, Amendment sixteen appears to grant supreme
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power to Congress to tax; however, that it not the exact case. The amendment did not expand the federal government's existing taxing power but rather removed any requirement for apportionment of income taxes (meaning tax on profit or gain from any source) among the states on the basis of population.
In 1955, the respective amendment faced a radical change when court case Commissioner v. Glenshaw Glass Co. 348 U.S. 426 occurred. During this case, a taxpayer had received an award of punitive damages from a competitor and sought to avoid paying taxes on that award. In light of this challenge, Congress produced a response that defined taxable income as gains, profits, and income derived from salaries, wages, or compensation from any manner of source for which income has been exchanged for services rendered, active or passive.
The first of the Progressive amendments is the 16th Amendment. Approved by the Senate in 1909, it introduced the graduated income tax where a person’s taxes increase relative to his or her income. Specifically, the tax charged 1 percent of incomes over $20,000 and a maximum of 7 percent on incomes over $500,000 (Walter Nugent, p.86). It was brought about after the 2 percent tax on incomes over $4,000 tariff in 1894, and was supported by President Taft, Southern and Western farmers, and the Progressives (Foner, p. 718). They believed respectively that the government should wean off obtaining money from tariffs, and that the income tax should fairly correlate to a person’s income. Moreover, it was believed that the amendment would ameliorate the drastic income disparity, and that it would provide the government with more revenue for its increasing state budgets.
The power to tax is key to a successful government. If a government is to act it needs the means to do so. The Articles withheld the power of taxation from Congress and gave it to the local governments. Congress could only appeal to the states for money. Unsurprisingly, the states did not respond with any of the requested money. This was a serious problem because the U.S. was in an incredible amount of debt as a result of the Revolutionary War. If money cannot be collected, how are debts to be paid? Some in Congress believed the problem could be solved by printing more money. However, this strategy only led to inflation, which weakened the economy furthe...
Sixteenth Amendment- Authorization of an Income Tax – Progressives thought this would slow down the rising wealth of the richest Americans by using a sliding or progressive scale where the wealthier would pay more into the system. In 1907, Roosevelt supported the tax but it took two years until his Successor, Taft endorsed the constitutional amendment for the tax. The Sixteenth Amendment was finally ratified by the states in 1913. The origin of the income tax came William J Bryan in 1894 to help redistribute wealth and then from Roosevelt and his dedication to reform of corporations. I agree with an income tax to pay for all of our government systems and departments, but I believe there was a misfire with “redistributing wealth.” The redistribution is seen in welfare systems whereby individuals receive money to live. This is meant to be a temporary assistance, but sadly, most that are in the system are stuck due to lack of assistance in learning how to escape poverty. There are a lot of government funded programs, but there is no general help system to help lift people up and stay up, so there continues a cycle of
Whether or not to keep or discard the Bush era tax cuts for the wealthy, give tax breaks to the lowest tax bracket, and even throwing out the entire current tax code and replacing it with a simpler version, tax code and tax law has been a very controversial topic for the past few years. As it stands, the current tax code has over seventy two thousand pages, compared to the four hundred pages it had in 1913. There are many different stakeholders in this debate including taxpayers, corporations, businesses, etc. Americans for Tax Reform (ATR) is an organization that was “founded in 1985 by Grover Norquist at the request of President Reagan”(.N.p.). Their goal is to create and advocate for a simple flat tax,“...on the belief that they will provide a strong stimulus to investment, employment, and output” (Stokey 1). They promote their organization and represent taxpayers in all fifty states. Along with tax reform, ATR also advocates for individual health care, free trade, and spending transparency (.N.p.). Using very simple and easy to understand images, ATR is able to convey their goals and get information across to the general audience that visits their website.
Our current system of taxation is a varied rate percentage based on different income brackets. Many say that it violates our constitutional rights through unequal taxation. Multiple deductions, loopholes, special rates, and a complex system of regulations all characterize our Federal Income Tax System, prompting many to question why it is still being used (Peters, 2013). The current system although bringing in over $3 trillion, taxes income multiple times, and includes the taxing of estate, labor, savings, and investments (National Priorities Project, 2013). The system itself is complex with over 20,000 pages of regulations, requiring a massive filing system, which is set up and maintained by an even larger IRS, requiring over $225 billion in compliance costs (Hall, 2001). One can be hard pressed to find an advantage in the current system, other than the fact that it provides the government with an enormous amount of funds, and it has...
The federal income tax is broken up into different groups based on a tax payers marital status. Taxpa...
Many ponder the idea of federal taxes and whether the wealthy deserve to pay a higher percentage rate of their overall income. That is, they argue that because our society needs more equality and a lower national budget deficit, taxes on the rich must be raised. This specific topic has been discussed for decades, and due to the severely different perspectives, it is unclear whether the two sides will ever come to an agreement. President Barack Obama and much of the Democratic Party strongly lean towards raising taxes on the rich, while the conservatives and the Republican Party heavily lean towards a more balanced flat tax. However, after extensive research and focus on what would be best for the equality of individuals, the nation and its economy, this paper will firmly prove that the top one percent should not be taxed any more than they are today.
A primary document, it was a message for the Federalists and to the American public in general. Although they did not fully support the Articles of Confederation, they did not want a new Constitution to be written. These people were concerned about how little freedom they would have if the federal government got more power. Because of this, they are against the beliefs of the Federalists. The Anti-Federalists are also concerned about how the national government could abuse its power if given a higher authoritative role in the revised Constitution. In order to show the concern, the authors write, “the legislative power is competent to lay taxes, duties, imposts, and excises; there is no limitation to this power..." The Anti-Federalists were afraid that allowing the national government to have so much power would be like living under Britain 's authority all over again. This would render the American Revolution pointless, they believed. They supported the state governments in having authority to tax, govern, and to have independence from the central government in doing so. They believe that if the central government starts taxing the people, the state governments would not be able to raise money
These were the powers to collect taxes, coinage, declaration of war and regulation of commerce. However, the national government’s role in the economy was limited to interstate commerce. The tenth amendment to the constitution reserved these powers to the state governments. This in effect ensured that the state governments controlled most aspects of the economy. Federal institutions were limited to ensuring and harmonizing cooperation, between different states, on economic matters.
judicial authority to arbitrate between states. The Congress denied the power to levy taxes. The
The Tenth Amendment was added to the Constitution of 1787 by James Madison due to the problem with its predecessor, the Articles of Confederation. In Article 2 in the Articles of Confederation it states, “Each state retains its sovereignty, freedom and independence, and every Power, Jurisdiction, and right, which is not by this confederation expressly delegated to the United States, in Congress assembled.” With states having too much sovereignty this caused an issue. Madison was a Federalist and believed that the federal government should have some control over states, therefore, he proposed the 10th Amendment. By the constitution getting rid of state sovereignty it meant Anti-Federalists fearing the possibility of a federal government with unlimited power. However, the states were able to compromise and ratify the Constitution under the agreement that powers not stated on it are reserved to the states or to the people. The 10th Amendment overall gives clarification that federal power is limited and that states or the have control on the issues not stated on the constitution. However, not everyone agreed to the 10th amendment. It was seen as
Throughout the 1860’s and 1870’s the Supreme Court often restricted the scope of the fourteenth and fifteen amendments. In the Slaughter-House cases, the court ruled that the 14th Amendment applied only to the federal government, not to state governments. Another way reform was restricted was through the implication of new voting restrictions. In United States v. Reese, the court cleared the war for poll taxes, literary tests, property requirements, and other restrictions. It would be another 100 years when the 24th Amendment was adopted in which the poll tax was abolished for elections. These newly imposed limits indirectly barred freedmen from voting and effectively rendering the south the same as it was before Reconstruction. By 1876, Southern Democrats had regained control of the southern
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
Southern states continued to prevail when poll taxes were deemed constitutional by the Supreme Court in 1937 in the case of Breedlove v. Suttles. The ruling of which concludes that the privilege of voting is not derived from the United States government, but is instead conferred by the state in which the voting is being conducted. With the exception of the restraints set forth by the 15th and the 19th amendments, suffrage was said to be conditioned by the states as deemed appropriate, which included the requirement of a tax payment (supreme.justia.com). With hopes of creating legislative opposition to poll taxes, congress made many attempts during the mid 1900s to pass a bill that would abolish them, but on each occasion the southern states managed to defeat it with one of their conquering filibusters against the bill. Fortunately, early support came from Franklin D. Roosevelt, who spoke out against taxation at the polls by labeling it as "a remnant of the revolutionary period," and suggested that congress should consider an amendment to the constitution as the best way to bypass the possibility of another filibuster, and the best chance to abolish poll taxes
An amendment to the constitution eradicating federal mandates would make lead the country to be more democratic by once again placing the majority of the say in the hands of the people and therefore, with the state legislatures. The federal government takes away the state 's right to decide for themselves on any matter when it uses underhanded tactics to ensure a desired outcome. It would be undemocratic to allow the federal government to continue doing so because it would further oppress the nation’s citizens. While some may say that giving the states more power is a false sense of democracy since it only entails transferring power from the federal to state government the state is more likely to have the vested interest of the people and hold true to it.