Obama's 30% millionaire tax

President Obama said that millionaires and billionaires have to be the minimum “fair share” to pay in taxes. It has to be at least 30 percent of their income. Also Obama said that people who earn more than $ 1 million a year should not pay less than 30 percent in taxes. The 30 percent marker is the first real detail Obama has offered since proposing the so-called Buffett Rule last September. That rule is a guideline intended to ensure that the very wealthy do not pay a lower percentage of their income in taxes than anyone in the middle class. The congressional research service estimated that a quarter of millionaires do not pay enough in federal taxes for satisfying the Buffet Rule. The CRS arrived at the number after considering what filers pay in federal income, payroll and corporate taxes combined. Obama also asserted to stop tax deductions for millionaires on home, health care, retirement and child care. Most of people do not support this rule, because they don’t like to pay taxes.

Price controls; Minimums and Maximums

The government sets the price of free market for society in general in order to achieve a different outcome. It calls Price controls. There are two types of Price controls which are Maximum (low) price controls and Minimum (high) price controls. Maximum price control is that the government sets a maximum price under the equilibrium price in order to attempt to prevent the market price from rising above a certain level. And so producers cannot raise the price and it has to be set below the free market price. It usually apply to agricultural products and food markets during shortages or the price for renting the house in order to stabilize the life for poor people. This can be kind of welfare system. Conversely, Minimum price control is that the government sets price above the equilibrium price in order to prevent reducing the price and increase the revenue of the producers.

Taxes and Subsidies

A tax is an amount of money that you have to pay to the government so that it can pay for public services. The main purpose of taxation is to accumulate funds for the functioning of the government machineries.

Other purposes of taxation:     -   Improvement in services of the government.

-       Improve employment at all industry verticals.

-       Induction of modern technology in to the system.

-       Rationalization of terms and condition of the economic system.

-       Rationalization of employment terms and conditions.

The advantages of tax

-People are taxed based on total income, thus people who make less theoretically pay less tax on earnings.

-Not all people consume at the same rate, therefore tax on earnings is a more equitable way of assessing tax than with a consumption tax.

-People with lower incomes would be the most impacted by a straight tax on consumption, since even necessary items like cars would be significantly more expensive.

-Income is an easier way to levy taxes and decide deductions. While people may deal with a few pay stubs they have to save, in consumption tax, people might have to save receipts for every purchase they made during a year in order to qualify for tax breaks.

The disadvantages of tax

-Discourage Business: people have to pay more of their income to the government.

-Penalize hard work: high taxes can stifle the motivation of individual workers. Also the macroeconomic problems that high taxes can precipitate, an onerous tax scheme can have the effect of penalizing hard work.

-Increase government control: When a government collects more in tax revenues, it accumulates more money to spend. This increase in discretionary income, compared with the money available to the citizens and businesses of the country, causes a shift in power away from the people towards the government

A subsidy is money that is paid by a government in order to help an industry, business and company.

The advantages of subsidy

-Supply more

-Decrease the price

-Increase employments

-Control the rate of inflation

-Increase the revenue

The disadvantages of subsidy

-Higher taxes

-Encourage inefficiency among producers

-Decrease the price (not good for free markets)

   

New IRS Tax Gap Report: Cheating Still Rampant

In 2006, Americans underpaid their taxes by $450 billion that was a lot of money; equal to a 17% noncompliance rate. Also it means that wage earners who are paying their fair share are paiying up more to compensate for the tax cheats out there. The IRS put out information on enforcement efforts to close the tax gap that are just getting underway. Americans underpaid their taxes by $450 billion in 2006. A crackdown on unscrupulous tax return preparers; this is part of a multi-year strategy to register all paid return preparers. But the major push is for more third-party information reporting. Compliance is the highest where there is third party reporting. As a result, a net of only 1 percent of wage and salary income was misreported. Stock brokers and mutual fund companies will be required to report costs basis information on stocks and mutual funds to investors and the IRS (no fudging your capital gains taxes). Similarly, new merchant card reporting requirements established this year should make it easier for the IRS to spot businesses that are either under-reporting receipts or not reporting at all. And new reporting requirements for a U.S. individual with financial accounts oversees will help the IRS keep an eye out for offshore tax avoidance. Despite all the complaints from the business community about information reporting, it’s a friendlier way to combat the tax gap than through increased enforcement efforts