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1. No taxation without representation” was part of a sermon given by Jonathan Mayhew just prior to the American Revolution (Johnson, D. 2009). Although legally citizens are represented by our lawmakers per state I believe a perception exists in the U.S that citizens are not represented equally.
Income tax serves as one means for the U.S. government to create revenue for services (Mikesell, J.L., 2019). Mikesell, J.L. (2019) explains that income tax has become a satisfactory source in the U.S. because of the idea that it provides equity through measurement, adjustability, yield, and wide base. However there are downfalls that plague the system. First, it is convoluted with complicated codes and rules that cloud transparency (Mikesell, J.L., 2019). The complicated system requires intense government work hours just to process returns plus leaves room for some to find loop holes to circumvent contribution (Mikesell, J.L., 2019). This seems like we are paying taxes, just to pay workers to assess our taxes. The discussion of fair income tax in recent years focuses in on the wealthier of our society paying a higher rate. The current system already does this. High income households absorb a high tax burden with 38.3% for the top 1% earners and 88% for the top 20% earners (Mikesell, J.L., 2019). I do not think this is fair for a couple reasons. First, the congestion of codes, laws and rules creates an unloved playing field because it treats various income differently which leaves the door open to misuse and loopholes. A reform to a simpler system would reduce the overabundance of “red tape.” Second, I am do not think it is fair that those who make more should have to pay more. My household is not considered in a “top earning household” category. I believe if we want to see things through equity those that make more should not be expected to carry more of the burden. I think a flat tax would bring equity to income tax. Just for example if a flat tax of 10% was applied the wealthier would pay more because they earn more, while lower incomes would pay less. Robert, P. (1999) made a good argument how flat tax could restore equality to the U.S. Robert, P. (1999) explained that if the government taxed genders differently, races differently as they tax income brackets differently there would be outcry of inequality. Is having different percentage of taxes for income brackets discrimination?
Property tax has multiple scopes of taxation. Real property refers to buildings, housing, land and any improvement made to those (Mikesell, J.L., 2019). Personal property is the catch all for everything else from personal items, cars, equipment, household items and investments (Mikesell, J.L., 2019). Additional categorization includes tangible and intangible. Tangible refers to personal property whereas intangible refers to financial assets (Mikesell, J.L., 2019). Mikesell, J.L. (2019) highlights that local governments that do not have access to the flexibility property tax provides it can prevent them from fulfilling their service obligations. I believe that property tax is not handled equitably. Per state they are not managed proportionately. Properties of similar size, families of similar financial background throughout different locations in the same city having varying property taxes (Mikesell, J.L., 2019). This unstable method of property taxation poses inequality for people of lower incomes (Mikesell, J.L., 2019). This is true for Kansas, where I live. My area has high property taxes, but services are minimal. Road improvements are poor, there isn’t snow removal in the winter, and fire services is a volunteer force. We are considered county residences outside of city limits. A quarter mile down the road from me is the city limit line. Two houses of same size, same acreage in the same area have two vastly different property taxes. Those two houses in the city limits pay 20% less property tax than we do and they receive city services.
Mikesell, J.L. (2018). Fiscal administration: Analysis and Applications for the Public Sector (10th ed.). Boston, MA:Wadsworth
Johnson, D. (2009). No Taxation without Representation: Prelude to the American Revolution. Retrieved from http://www.us.history.com.
Roberts, P. (1999, December). Flat Tax Gains Ground Human Events. Vol. 55 Issue 49, p16. Retrieved from https://academicguides.waldenu.edu/library
2. Taxes is defined as a sum of money that is required by the government to support specific services and organizations. Taxes is a charge, obligation, duty and demand. Taxes in the United States are collected from their own-source revenue such as income, sales and property ownership (Mikesell, 2018). Tax fairness is divided into three different components. Distributive is the fairness concern of taxpayers and their perception of benefits received for sharing their wealth with society. Procedural tax fairness refers to the tax collection process. Retributive fairness regarding taxes concerns the appropriateness of sanctions where rules are infringed (Niesiobędzka & Kołodziej, 2019).
Property tax are a major own-source revenue producer for local government. Property tax is a pre-dominant local tax, only major tax within means of independent and local administration and has the capability of a statutory-rate difference between the small geographical areas (Mikesell, 2018). Property taxes are collected by the government and this tax is connected to the value of housing stock and commercial property within communities. This tax is assessed annually, and they levy a percentage tax value on the property. When the property loses value, the property taxes may go down over time but that may not always be the case, that is what is unfair about property taxes (Laureate Education, 2008b).
Sales Tax revenue is a share of a state’s total revenue and can range from zero in states that do not levy a sales tax to high percentages in other states (Stratmann, 2017). Sales tax are lucrative sources of revenue but can be regressive impacting low-income populations the hardest (Laureate Education, 2018). Based on the repressiveness of sales taxes, this makes sales taxes unfair to some based on income and financial statues. Some states in North Carolina in the past opted- out of the tax-free day in the past. Greenville, North Carolina was one of those states. This impacted low-income households whom have school aged children that need clothing and supplies. Personally, I feel that no state should be given the right to opt-out of a tax-free day especially if it assists parents with purchasing items their children need for school. Some states are all about a buck and do not show empathy for low-income families that are trying to make it.
Laureate Education (Producer). (2008b). Budget management functions: Revenue [Video file]. Baltimore, MD: Author.
Mikesell, J. L. (2018). Fiscal administration: Analysis and applications for the public sector (10th ed.). Boston, MA: Wadsworth.
Niesiobędzka, M., & Kołodziej, S. (2019). The impact of procedural fairness and extent of a tax loss or gain on the acceptance of tax authority decisions and the intention to appeal against them. Psychology, Public Policy, and Law, 25(1), 46–56. https://doi-org.ezp.waldenulibrary.org/10.1037/law…
Stratmann, T. (2017). The political economy of sales taxes and sales tax exemptions. Public Choice, 171(1/2), 207–221. https://doi-org.ezp.waldenulibrary.org/10.1007/s11…
3. According to Jacqueline Byers, governments need a diversified portfolio of revenue sources to fund its obligations (Laureate Education [Producer], 2008b). Two common sources for the City of Dallas are sales and property taxes, which may be evaluated using Mikesell (2018) criteria for evaluating taxes and tax systems modelled after Adam Smith’s standards in The Wealth of Nations 1776. These may be categorized as equity, economic efficiency (modern concern for transparency), collectability (cost and simplicity), as well as revenue adequacy and consequences.
Fairness and equity concern the distribution of the revenue burden on taxpayers. Mikesell (2018) states that there are two general equity standards “(1) according to taxpayers’ benefits from or usage of the public service (benefits received) and (2) according to taxpayers’ capabilities to bear the burden (ability to pay)” (p. 372). By considering this, governments should choose a tax burden that is both moral/ ethical (fair) and realistic. In so doing, equity can be made to coincide with the need to raise tax revenue. The City currently imposes an 8.25% sales tax on the purchase of all goods and taxable services. Since all taxpayers are caught in the tax base regardless of income, this tax appears to lack vertical equity, defined as the relative tax burden faced by those with different incomes or ability to pay (Mikesell, 2018). This lack of equity may be understood from the perspective that those with more should pay more, as sales tax takes proportionately more from taxpayers with low incomes who have no choice but to spend a larger portion of their income on basic needs. The current property tax rate is 77.67¢ per $100 valuation, with a tax exemption threshold of $90,000 for the disabled and persons 65 years and older (City of Dallas, 2018). How the property tax is appraised by each of the four districts, including age and other factors imply a lack of horizontal equity, whereby persons with equal ability to pay are likely not treated equally.
In terms of economic efficiency, Adam Smith suggests that “the tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person” (p. 364). The City of Dallas appears to have transparency for both taxes with the information provided in their annual budgets and published online including the procedure and timeline for payment (City of Dallas, 2018). The City also appears to satisfy the collectability criteria, which broadly looks at whether the taxes are collected in a manner that is effective considering convenience and costs. For instance, property taxes are collected via online payments, by mail, phone or in person (City of Dallas, n.d.). These may be considered convenient to taxpayers and cost effective for the City. Finally, revenue adequacy determines if revenue covers the spending required to provide needed services. The City of Dallas 2018FY CAFR shows adequacy with a $1.38 billion surplus of revenue over expenditure, with the overall finances indicating future sustainability.
City of Dallas, Texas. (2018). City of Dallas Annual Budget: Fiscal Year 2018-2019. Retrieved from https://dallascityhall.com/departments/budget/financialtransparency/AnnualBudget/1819-0-Adopted-Budget.pdf
City of Dallas, Texas. (2018). Comprehensive Annual Financial Report for the Fiscal Year ended September 30, 2018. Retrieved from https://dallascityhall.com/departments/budget/financialtransparency/AuditedFinancials/CAFR_FY2018.pdf
City of Dallas, Texas. (n.d). Property Taxes. Retrieved from https://dallascityhall.com/departments/budget/Pages/Property_Taxes.aspx
Mikesell, J. L. (2018). Fiscal Administration: Analysis and applications for the public sector (10th ed.). Boston, MA: Wadsworth. Kindle Version.
Laureate Education (Producer). (2008b). Budget management functions: Revenue [Video file]. Baltimore, MD: Author.