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Essay / Research Paper Abstract
This 5 page paper explains what each of these taxes are and the pros and cons of each. Bibliography lists 11 sources.
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5 pages (~225 words per page)
File: MM12_PGtax.rtf
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sales tax, the flat tax and a Value-Added Tax (VAT) (Kuttner, 2004). The Lifetime Savings Account, proposed by the President is similar to both a flat tax and a
consumption tax: "most households could avail themselves of a consumption tax akin to the Flat Tax. They would pay taxes once when they earned wages or business income,
but not again on returns to saving" (Hubbard, 2004). The money can be saved for any purpose with no withdrawal penalties (Hubbard, 2004). The Retirement Account would also still
be an option for individuals (Hubbard, 2004). A flat tax, a very popular proposal is simple, it is a percentage of income. There are no deductions for children, medical
expenses, mortgage interest, charitable contributions or anything else (Froomkin, 1998, Ponnuru, 2004; Maggs, 2005). If the tax were 10 percent and the taxpayer earned $25,000, the taxpayer pays $2,500 in
taxes. The advantages of the flat tax are: it is simple, it eliminates loopholes, it eliminates double taxation, i.e., tax on investment returns and it puts everyone in the same
tax bracket no matter how much they earn (Froomkin, 1998). This type of tax ends the double-tax many people face, i.e., taxed on income that is invested and then taxed
again on profits generated by the investment (Froomkin, 1998). It is possible to allow a large deductible, the same for everyone, to help all individuals (Froomkin, 1998). Kotlikoff points out
that the flat tax proposals being considered are not at all equitable and would still leave the wealthy paying less proportionate taxes (2005). The reason is the transition phases incorporated
into the different flat tax proposals (Kotlikoff, 2005). If the flat tax were simply substituted for the existing income tax system, without any type of transitions, etc., it would
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