Economics of Taxation Essay Example | Topics and Well Written Essays - 1000 words - 1

Economics of Taxation - Essay ExampleDoes the Family belief alter the marriage penalty or bonus?Under the contemporary 2006 revenue system, the value of the in the flesh(predicate) prerogative and standard deduction for household 1 (married couple) would be a consolidated amount of $16, 400. This is do up of the personal unsusceptibility of $3200 ($6400 for 2) and a joint standard deduction for the married couple of $10,000. The analogous value calculated for household 2 amounts to $8200 for personal exemption ($3200) and standard deduction ($5000).As per the change Income Tax Plan proposed by the advisory panel on tax reform, Family Credit replaces the personal exemption and standard deduction. It is forthcoming to all taxpayers. For a married couple with no children, it amounts to $3300 whereas for an unmarried taxpayer it is $1650. Assuming that the current income tax brackets prevail, the following comparative analysis would justify whether the taxpayers prefer the old tax code or the new Simplified Tax Plan2. Which is more equitable the current system with the personal exemption and the option to take either the standard or itemized deduction, or the Family Credit which everyone can take, even if they overly itemize deductions? Discuss both plane and vertical fair play and explain your answer.Solution Tax equity focuses on equal treatment of similarly situated taxpayers (Sommerfeld, Anderson, & Brock 9). There are two tax principles, namely, horizontal equity and vertical equity. Horizontal equity is a basic yardstick used to measure whether tax burdens are fairly distributed. According to this principle, taxpayers with same income should pay the same amount in taxes. On the other(a) hand, the principle of vertical equity is a proponent of the progressive structure of tax assigning uplifted income earners greater responsibility to share the tax bill (Kaplow 1989).Under the current system, personal exemption is available to