The Purpose of the US Income Tax System and the Three Different Policy Proposals

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US income tax system


To establish new tax system in order to bring more money to cover the budget and avoid debt ceiling which is limited amount of money that United States can borrow from another country. This policy memo will help Senator Joe Donnelly to take a stand on the specific tax reform system among three different taxation system.


According to three of your Senate colleagues, they suggested three different proposals in order to reform the taxation system.

This is three different proposals:

  1. Implement a “flat tax” on income at a rate of 18% for all Americans
  2. Change tax rates on capital gains so that investment income is taxed at the same rates as wages and salaries
  3. Implement the GOP “Blueprint” proposed tax reform
  4. Implement the Democratic party’s reform form its 2016 party platform

In 1789, Benjamin Franklin said “Nothing is certain expect for death and taxes.” This a famous word implies that no one is free from the tax and it is essential for everyone.

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Moreover, there were lots of changes in taxation system due to the national affairs such as The Great Depression, World War I and II. The fact that United States need more money to cover the budget and prevent deficit increase, Democratic party’s tax reform will bring enough money and minimize the antipathy towards government.

Our primary goal in this policy proposal is to collect enough tax revenue for next year spending and satisfy Hoosier voters in purpose of reelection prospects. Among the four different proposals, last policy is most suitable for current situation.

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According to the Democratic Party’s tax reform, the policy mainly focuses on taxing the millionaires and stop the company tries to escaping United States due to the corporation tax.

By using a taxable income quote from Warren E. Buffett, he said “I only pay 17.3 percent of my which is lower than any of the other 20 people in our office.” (Buffett, para 4, 2011) It implies that the government should stop the rich to get benefit from extraordinary tax break. Moreover, nonpartisan Congressional Budget Office said “between 2007 and 2009, top 20 percent of income earners paid 70 percent of federal taxes” which means restoring tax policy for millionaires can possibly increase the tax revenue for the government. (Whalen, para 3, 2012) Moreover, by lowering the corporate tax, we could prevent our company to leave and make profits from foreign countries.

High corporate tax rate has caused negative effect on our economy because potential for job opportunity have shifted to different countries. Even though current corporate tax in United States is highest among the OECD nation, it only accounts for 10 percent of total tax revenue. Therefore, modifying the corporate tax policy will bring back the company and it will boost job creation which is in favor of Hoosiers voter.

For second policy, people who earn most of their income from capital gains would not favor in this reform system and this could effect on voters. In addition, tax analyst Leonard E. Burman said that “capital gains rates have no relation with GDP growth and economic benefits.” (Burman, p. 81, 1999) For this reason change tax rates on capital gains is not a best solution for us. By raising tax rates on capital gains might help government to bring money to cover the budget, but it would not give any beneficial to the economic.

As well as second policy, flat tax system will antagonize many Hoosiers voter. According to the data by the Commerce Department, “average income for Indiana is about 87 percent of the national rate and still earning less income than national average.” (Groppe, para 7, 2014) This data implies that 18 percent of flat tax rate can be a burden for people who earn less than national average income. This tax system would make everyone pays the same rate which only gives benefit to the high income earners.

This is pros of the Democratic Party’s tax reform (2016):

  • Fair tax system on millionaires
  • More company in United States
  • Benefits in economic growth
  • Job creation

In order to maximize economic growth and satisfy most of Hoosiers voter, Democratic Party’s tax reform is most suitable in current conditions.

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The Purpose of the US Income Tax System and the Three Different Policy Proposals. (2023, Mar 23). Retrieved from

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