Wouldn’t a flat tax be super simple and efficient?
As discussed in chapter 4, the flat tax is basically a value-added tax with a wrinkle: businesses are allowed a deduction for wages paid, but the employees are subject to a single-rate tax on...
How do taxes affect the economy?
In many, many ways. They reduce the reward to working, saving, and investing and so diminish the incentives to undertake these activities, which can lower GDP and hamper growth. When they discriminate among different activities, they affect how the...
How do we tax corporations’ income?
In principle, under an income tax all income is subject to taxation. Moreover, no kinds of income are subject to exceptionally high tax and no kinds are subject to exceptionally low tax. This principle applies to labor income, the...
What is behavioral economics?
The standard economic model assumes that individuals and businesses are rational, well informed, and good at math. Individuals make themselves and their families as happy as they can over the course of a lifetime subject to the resources they have at...
What’s the difference between personal taxes and business taxes?
Some taxes are levied on people and some are levied on businesses. This distinction is less important than you might think. The fact is the person or business entity that writes the check doesn’t necessarily bear...
Why is everyone always so worked up about taxation?
Taxes in America amount to about 30 percent of national income, or roughly $15,000 per man, woman, and child. That’s a lot of money that could otherwise be spent on goods and services that people value...
How complicated is the U.S. income tax?
In a 2015 poll, 72 percent of Americans said they were bothered by tax complexity, with 44 percent declaring it bothered them a lot.1 How complex it actually is depends on who you are or, more...
How much does it cost to run the U.S. tax system?
The easy part of answering this question is to add up the budgets of the various tax administration agencies across the country. At the federal level, that would be the Internal Revenue Service, or...
The estate tax is a tax on the wealth held by people when they die. (The “estate” is the legal entity that holds assets between the time of death and payment of any tax and distribution to heirs of the remaining assets.) The federal tax...
What is a consumption tax?
A consumption tax is a tax triggered by spending. In the United States, the most common form of consumption tax is the retail sales tax administered by most states and many local governments. There are also specific consumption taxes called...
