Current Federal Tax Policy

Current Federal Tax Policy

Current Federal Tax Policy

The significance of the effective tax policy can not be overestimated Taxes influence both individuals and economy as a whole . Main sources of the tax receipts are individual and corporate income . This is shown by Froomkin (1998 ) in his article

Federal tax receipts in 1996 amounted to about 1 .5 trillion dollars . About half of that came from individual income taxes , about 13 percent from corporate income taxes , and the rest from employment estate , gift and excise taxes

Further , individuals with adjusted

gross incomes of over 200 ,000 dollars accounted for 31 percent of the individuals , even though they accounted for only 1 .1 percent of individual returns . By comparison , the 55 percent of individuals making under 25 ,000 dollars contributed only 6 percent of the 1998

Current federal tax system is characterized as progressive . It means that income tax rates increase as taxpayers ' incomes rise . As a consequence , those with higher incomes pay a higher proportion of their income in taxes . At the same time , lower- and middle-income individuals and families must spend a higher proportion of their income for essentials than the rich , who presumably have more disposable income and can afford higher taxes (Froomkin , 1998 . Except salaries interest and earnings on investment are also taxed

In general , current tax system is hideously complex . There are a lot of kinds of taxes levied on individuals , as well as households and families . Because of this proponents of reforming of the current tax system advocate the effectiveness of some tax changes . They believe that a simplified tax system will unbrace the economy 's burden . However , we should keep in mind that the current system is extremely entrenched That 's why it is impossible to predict the effects of deracinating it .The current federal tax policy is aimed at maintaining the continuous and stable economic growth . Thus , recently enacted fiscal relief package will increase the growth potential of the economy , as well as consumer and business spending . On May 28th 2003 , the President signed the Jobs and Growth Tax Relief Reconciliation Act (JGTRRA ) which included all key features of the President 's proposal . The Act accelerated many of the tax reductions passed in the 2001 Economic Growth and Tax Relief Reconciliation Act (EGTRRA ) that were scheduled to take effect several years from now . The 2003 jobs and growth tax cut also reduced the tax rate on dividends and capital gains and on the business side , it temporarily increased incentives designed to speed up investment ( Office of management and budget , Economic Assumptions 2004 . Main advantage of the 2003 Act is that it decreased marginal income tax rates . This is shown in Table 1 (Appendix 1 , which compares the marginal tax rates of JGTRRA and EGTRRA . Also , the 2003 Act decreased the maximum tax rate on dividends , applying to dividends received in taxable years beginning on or after January 1 , 2003 and before 2009 , to 15 percent for taxpayers above the 15 percent marginal income...