The debate on the best tax system for use in the taxation process cannot be wished away. Often, people find themselves at the crossroad when it comes to choosing between the best tax systems for use. The present tax system is based on progressive tax rate with tax deduction vary from taxpayers with different earning. In the light of the ongoing debate, the present tax system has been faulted for its disadvantages. Nonetheless, with a flat tax system there is likely to be reduction in complexity of the taxation process, transparency in government practices, increase in investment, an increase in national productivity, removes double taxation and increased tax base.
The present tax model has a number of challenges which have motivated its criticism. Based on the progressive tax rate, the current model is seen as promoting inequality among the taxpayers (Ornstein 305). With the current model, tax payers who earn more money are being subjected to more taxation than those who earn less money than them. The resulting disparity in taxation has caused a reason for people to believe the present tax system favor some people. By taxing some people more than others, the present tax system increases inequalities yet the constitution promotes equality among all citizens.
The current tax system is well known for preventing individuals into filling vacant jobs that are well paying. Instead, it promote individual into taking less paying jobs for the purpose of the evading the huge tax been expected from them. As a result of this fear, many workers have missed the opportunity to broaden their skills as well earn money that is comparable to their academic qualification. The net effect of this occurrence has allowed fewer people to be motivated into taking good jobs for fear of high taxation.
The introduction of the flat tax system will be useful in simplifying the process of taxation across all the states using it. Unlike the present system, flat tax system has the potential of creating simplicity in the manner in which tax are collected from all taxpayers. Through the use of flat tax system, several bottlenecks that increase the complexity of the taxation process can be eliminated. For instance elements in the present tax model such as dividends, capital gains, royalties, rents and interest make the taxation process tedious and clumsy. However, the use of a flat tax system will eliminate these elements (Browning 140). As a result, the taxation process will be made very simple across all participating states.
With a flat tax system, it is believed that transparency will be infused into all government practices (Ornstein, 2007). With the current tax system, the process of taxation has been buried in many practices some of which might be void of transparency despite its importance in promoting confidence in the actions of the state. In most cases, people employ accountant to determine the process of taxation from them. However, this can lead occurrence of malpractices which may fail to draw the exact picture of how the government is transparent. With the introduction of the flat tax system, it will be possible to increase transparency through making the taxation process to have few challenges which might hinder its efficacy.
Another positive effect of the flat tax system will be its effects in the investment opportunities in a given country (Fowler 47). The flat tax system does not tax the investments made but it tax the national sales which provides more incentive to those who wish to make credible business within the country. Much of this benefit will be experience in the stock market which is likely to surge through the investment made by people as result of not taxation on their income. Based on such benefits as those resulting from investment, the flat tax system will improve the investment opportunities’ to any investor willing to invest. In the new, new jobs might be created as a result of more influx of capital into various investment portfolios.
The adoption of the flat tax system is likely to increase the number of people are working as well the hours taken to work. It is believed that the current tax system does not provide incentives to worker. This is because it promotes one user over others and this limits those individuals to work fearing for heavy money. As compared to the current system, the new system is posed to increase the number of people who can work in different labor. With taxes pegged on consumption, many workers will have incentive to work and increase their productivity at their place of work.
Some people argue that the flat tax rate reduces instances of double taxation which has more effect on people in the current model of taxation. One of the reasons for the championing of the flat tax system is the fact that this system is vital in eliminating double taxation (Edwards and Mitchell 59). In the current tax regime, there are several claims that people are being taxed twice and this reduces their earnings considerably. However, the use of the flat tax system will reduce instances where individuals are tasked twice. This will be possible through the removal of the capital gains tax double taxation made on dividends and savings, and death tax. As a result, the adoption of the flat tax system will reduce the demand on individuals in making the reporting of interest and dividend no mandatory.
If the proposed tax system is adopted in preference over the current model, there is high potential that the tax base will be increase considerably. In the current system, many people go untaxed when they employ means and strategies of evading taxes. However, then new taxation model will ensure that all those who make purchases are taxed. As a result, more people will be tasked and this will provide more tax base than before. Evidently, there are more benefits that will be experienced if the proposed tax system is adopted. Most importantly, investment and productivity will soar, transparency and fairness will be achieved, double taxation will be reduced and the tax base will be increased. With such benefits, it is essential to increase the call for a complete overhaul of the