Date of Award

Spring 2006

Document Type

Thesis

Department

Business, Accounting & Economics

First Advisor

Belle Marie

Second Advisor

Eugene Franks

Third Advisor

Elizabeth Chute

Abstract

"‘Tis true that governments cannot be supported without great charge, and it is fit [that] everyone who enjoys a share of protection should pay out of his estate his proportion of the maintenance of it" (Locke). Federal income taxes and tax preparation serve as a vital and important portion of the United States’ economy and the functioning of the federal government. Millions of individuals and businesses spend large quantities of time, money, and effort to effectively measure income to remit their share to the federal government. The issues regarding income tax preparation have an influence far beyond the federal budget, tax refunds, and tax payments. Federal taxes, at least indirectly, impact every portion of American citizens’ lives and every business that has operations in the country. The complexity of the tax code is a source of frustration, anger, and sheer hatred for many Americans. A survey created for the Tax Foundation, “Attitudes on Tax and Wealth Issues,” stated that 70 percent of those surveyed either “dislike or hate” doing their income taxes (Dalbec, 2005). Eighty-one percent also believe that “the current federal income tax [code] is very/somewhat complex” (Dalbec, 2005). In addition, 77 percent attest to the perspective that “the federal tax system should be completely overhauled [or that it] needs major changes” (Dalbec, 2005). But frustrated taxpayers are not the only concern in this matter as “The economy is dramatically affected by the state of tax law” (Moody, 2001). A constantly changing tax system, coupled with increasing complexity, can make long-term business planning and investing somewhat difficult. There are a multitude of possible tax systems, the most common being the progressive income tax and the flat income tax. This thesis will discuss the current progressive system in the United States and a flat income tax scheme. The systems have their strengths and weaknesses, along with an impact on every social class, institution, business, and government in the United States. Additionally, the tax system impacts every individual that earns income in the United States, along with every business that conducts operations in the United States in even a minimal capacity.

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