Tax Reform: An Ongoing Debate in US Congresses - Essay Sample

Introduction

Reformation of tax has been a debated theme in the last several congresses. Many policymakers in America are in agreement their tax system is required to reform. Therefore, the legislature carries on with the search for ways to create the American tax structure to be fairer, lower tax, broaden the tax base, and more straightforward. As a result, lawmakers confront difficulties in ratifying and identifying policies by taking into deliberation the competing proposals. This paper supports Congress to carry on debating the tax reform choices as it provides an outline of the two lawmaking proposals.

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In the 115th legislature, two 2016 reforms suggestions are shown to be the forefront of the congressional discussion. The first tax reform proposal in the House GOP's "A Better Way," which was read in June 2016 and the second tax reform proposal, is President Trump's operation unconstrained in September 2016. The House GOP's tax improvement proposal is proposed to returns unbiased. The tax reforms blueprint requires a combination of the present seven tax charges on personal labor earnings into three: 10%, 20%, and 25%. For a personal income tax, the program would reduce the rates to up to 33%, increase the base, and change some elements about the family structure and size. This will occur through the removal of the personal exemptions, allowing increased deductions and adding a dependent credit.

The suggestion also would lower assessment on actual pass-through commercial payments, capital gains, and earnings. There will be repealing the optional least tax and Affordable Care Act- relayed tax provision. Therefore, to compensate for the revenue loss connected with these suggestions, the blueprints call for the elimination of all detail reduction, apart from the decrease for generous finances and contribution interest, abolish of individual release, and the revoking of diverse and to be resolved tax expenditure. On the businesses part of the income tax, House blueprints there will be 20% tax reduction and removing the businesses AMT.

President Trump's campaign plan is proposed to be revenue-unbiased. This President's campaign proposal also entitles for combining the seven rates of tax on personal earnings interested in three: 12%, 25%, and 33%. The plan would raise the average deduction, boundary deduction, as well as abolish the 3.8% unfair Medicare duty the same as AMT. On the business side, they would exist subjected to a 15% earnings tax. The earnings of businesses among the overseas business would no longer exist for deferral, in addition to the last made overseas income resource would be entitled to a 10% estimated repatriation duty that is allocated over ten years. The majority of the business duty expenditures would be removed apart from for the R&D tax recognition (Ruiz et al., 2017).

Regardless of the House GOP's and President Trump's campaign, tax improvement proposals are showing the same interest in having a better tax system in America. There are still key differences between these proposals. Both Trump and House GOP proposes fewer tax brackets. In trump proposal plan there will be tax bracket of 12%, 25% and 33% while the House GOP plan will be 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. The qualified dividends rates and capital gains are 0% in 12% bracket, 15% in 25% bracket, and 20% in a 33% bracket in the Trump plan while 50% in House GOP plan. The personal experience in Trump's plan allows replaced with the above the line deduction for the eldercare expenses, child care expenses, and tax-deferred dependent care savings accounts. However, that of House GOP plan allows replacement with increased dependent credit and expanded child tax credit. The corporate tax rate is 15% in the Trump plan but 20% in the House GOP plan. Trump's plan suggests that the business, such as partnership, corporations to be taxed at 15% while the House GOP plan has it at 25%.

Analysis of the pros and cons of these policies plays a role in decision making. The abolition of medical deduction in the House GOP plan will have a negative impact, especially to the poor and the middle class, older adults, and in need of living facilities and beyond. The wealthy will be favored in the proposed GOP tax plan of the terrific break removal of the alternative minimum tax, which would give to the upper brackets. In President Trump's plan, the richer will be disadvantaged since they will experience a more significant tax cut of 7% points compared to the middle and the poor class who will have a 1% cut point (Dharmapala, 2018).

From the comparison of the House GOP plan and Trump plan, despite the difference in the tax relief, Tump's strategy seems to be far more generous. Whereby the nearly 75 million households will no longer be paying any income tax, these people include the single who receive a smaller amount of $ 25,000 and the jointly married who receive less than $50, 000.

Conclusion

In conclusion, as of date, none of these two proposals has been initiated to offer a comprehensive improvement for both personal and business income tax coordination.

References

Dharmapala, D. (2018, October). International spillovers from proposed US tax reforms. In the Australian Tax Forum (Vol. 33, No. 1).

Ruiz, M. S. V. L., Peralta-Alva, A., &Puy, M. D. (2017). Macroeconomic and distributional effects of personal income tax reforms: A heterogeneous agent model approach for the US. International Monetary Fund.

Sokolovska, O. V. (2016). Race to the bottom in international tax competition: some conceptual issues. Journal of Tax Reform, 2(2), 98-110.