United States Taxation Public Policy - Essay Prowess

United States Taxation Public Policy


Public Policy-Taxation in the United States and Systems of Taxation Worldwide

Tax systems in the United States are imposed at both the state and federal levels. Individuals and corporations net income is also a subject of taxes by local, federal and state governments. The United States have the most progressive tax system among the industrialized countries. Rules governing the tax systems among the state differ from the federal rules. Federal taxes rates range from 10 percent to 39.6 percent of the taxable income (Giovannini, Hubbard, & Slemrod, 2007).

The nation also taxes its nonresident citizens on worldwide income as its residents. Every state and federal government imposes payroll taxes such as Medicare taxes, Social Security on both employee and employer. Taxes in the U.S depend on the income, property, transactions, business activities, importations and type of taxpayer (Giovannini, Hubbard, & Slemrod, 2007).

Flat Tax is a possible alternative to the current progressive system. It uses a single rate that affects all income brackets of taxpayers. For instance, Americans would pay a flat rate of 9 percent on their corporate or personal income and on sales. The flat rate system would simplify the tax codes and increase the tax bases (Giovannini, Hubbard, & Slemrod, 2007). However, it may increase the tax burden to the middle and lower income of Americans while reducing taxes to the wealthiest. Therefore, it will only benefit rich citizens.

Moreover, if the nation uses tax-based reforms such as national sales tax it can solve the inequalities issues in America. The United States income inequalities are one of the highest in the developed world. This is measured using the Gini Coefficient. National sales tax rates are constant irrespective of income. The lower income individuals use more of their total income as compared to the rich on sales taxable purchases (Giovannini, Hubbard, & Slemrod, 2007). In addition, sales tax can be used to support social safety net-programs such as food stamps, Medicaid, Medicare, and Social Security hence helps to lower income inequality. In addition, it helps to open up economy and preserve social cohesion.



Giovannini, A., Hubbard, R., & Slemrod, J. (2007). Studies in international taxation (5th ed.). Chicago: University of Chicago Press.