Federal Sales Tax
The purpose of the proposed Fair Tax Act of 2003 is "to promote freedom, fairness and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the states." (Boortz, 2003). Unfortunately, there are a lot of beliefs about the proposed legislation that simply aren't true. Fears range from inflation, lower economic growth, unpredictable revenue shortfalls and unfairness to the poor. This paper explains that these concerns are not only false, but that the exact opposite is true in most instances.
One of the common misperceptions of the Fair Tax Act is that it will fuel inflation and dramatically impact the demand for goods with high price elasticities. However, it's likely that the sales tax will have minimal impact on prices. This is because there are already embedded taxes on all products and services that are purchased at the retail level that are estimated to be around twenty-two percent of their costs (Boortz, 2003). This twenty-two percent represents the payroll taxes and corporate business and income taxes paid by manufacturers, shippers, wholesalers, merchandisers and retailers. So, with regard to prices, all The Fair Tax Act really accomplishes is a replacement of embedded taxes with an equivalent direct sales tax, producing no significant change in the prices of goods and services for the consumer.
Any change in prices would indirectly come from the lower interest rates that The Fair Tax Act is expected to produce. Economic researchers predict that interest rates would drop in the direction of the current tax-free interest rate as the tax differential between the pre-tax and the after-tax rates of return was removed (Burton and Mastromarco, 1997). It is difficult to estimate exactly how much interest rates would fall because demand for credit would rise as well,...
Federal Budget Process Every year the federal administration is involved with a total revenue and expenditure of about 1.5 trillion USD as a matter of fiscal practice. (Keith, 1996) The budgetary strategy of the federal administration is an integration of the guidelines that the policy makers, legislator, bureaucrats apply for designing, continuing, regulating and accounting fro the expenditure and revenue strategy. Normally the budgetary strategy involves formulation of the budget of
Considering the enormity of this one example ($416,000 per person?) and considering that it is just one of many examples to be found in wasteful dollars, one could easily state that the budget process is out of control. Even when politics are set aside the process of determining a budget for a country as big and diverse as the United States is a difficult venture. Recently a panel of politicians
With these criteria in mind, we will turn attention to the current federal budget, which has been in deficit status since 2002, and seems destined to remain so for the next several years. The FY2006 proposed budget includes a $390 billion deficit, not including potential expenditures in Iraq and Afghanistan or any social security reform measures undertaken -- a seemingly huge discrepancy between government revenue and spending (Cashell 2005, p.
balanced federal budget. Justify your position for or against a balanced federal budget by explaining the gains and losses associated with your position. A balanced federal budget: Is it a good thing? Why is a federal budget deficit so bad? The budget deficit is so politically contentious few seem willing to ask this simple question. Because of the anti-deficit hysteria, even some ordinary citizens will protest: 'I cannot spend at a
federal bureaucracies accountable for their actions? How are they held accountable? In general terms, there are a number of ways by which federal bureaucracies are held accountable. One example would be the President holding Cabinet members responsible for the actions or inactions of their agency employees and personnel. For example, if someone "drops the ball" at the Veteran Affairs Administration, the Internal Revenue Service or other agencies, the people that
Rather than propping up "bad blood" and allowing the "illusion" of wealth to continue to be fostered, the Federal Reserve should allow the market to flush out the "bad blood" and operate the way it is intended. Conclusion In conclusion, the good that the Federal Reserve does is to monitor economic policy, encourage maximum employment and long-term stability. The way it does so, however, especially in times of crisis such as
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