Every society has an economic framework governed by laws, policies, and institutions that contribute to distinctive distributions of economic incentives and burdens among the members of the society. The economic frameworks are usually brought by human political processes and they usually change across societies and within societies over time. Economic frameworks play an important role in the society because their structures significantly influence the economic distributions, which in turn affect people's lives. One of the most significant aspects of economic frameworks is accounting principles and practices that play a significant role in the effectiveness of these systems. From a wider political/economic view, understanding the function of accounting is crucial for understanding how a society's economic framework operates. Generally, accounting is entrenched in a capitalist, free-market, and economic system through promoting the values upon which the system is based.
The topic of distributive justice originates from arguments regarding the morally preferable economic frameworks and resulting distributions (Lamont & Favor, 2013). As a result of its origin, the principles of distributive justice are considered as offering moral guidance for the political processes and structures that influence the distribution of economic burdens and incentives in societies. Based on exploration of the application of justice within different contexts, the concept of justice usually involves the notion that people should obtain what they deserve or what they have a right to receive. As one of the ways in which justice is applied, distributive justice is linked to the means with which the economic system or product is allocated or distributed. Therefore, distributive justice focuses on addressing the issue of what is the most equitable means to distribute economic growth and wealth among people within a specific society (McPhail & Walters, 2009, p.120). The debate about the distribution of wealth and property way in an economic system is centered on four concepts i.e. efficiency, entitlement, liberty, and utility. Generally, distributive justice can be described as a concept that focuses on the fair or just allocation of economic wealth and resources among the various members of a community.
Accounting Practice and Distribution of Resources:
Accounting is defined as the language of business through which the distribution of economic growth and wealth is distributed. Therefore, this concept is crucial in the development and preservation of justice for society with regards to allocation of wealth and property. Accounting practice has developed to become an important part of human interaction since the beginning of trading, specializing, and battering. As a result, accounting practice has assumed an important role in various fields that contribute to the defense and preservation of justice.
However, one of the major concerns that have emerged in the recent past is whether accounting practice contributes toward a just distribution of resources. When this issue is examined from various perspectives, it is quite clear that accounting practice does not contribute toward a just distribution of resources. In a free-market and economic system, accounting practice contributes toward unequal distribution of resources among members of a society. The first way in which accounting practice does not contribute towards a just allocation of resources is competition. According to neoliberal proponents of the free market, competition contributes to disparity in the allocation of resources through the development of new and high-quality products and services. Even though the market is geared towards improving people's lives, there is unequal distribution of resources because the system needs to reward harder-working and more creative employees (McPhail & Walters, 2009, p.120).
Secondly, unequal distribution of resources through accounting practice is associated with the idea of liberty or freedom of contract. The unjust distribution of economic resources occurs since people have the liberty to enter into market transactions as they wish. Therefore, just distribution of economic resources would require rewarding individuals equally for unequal efforts or force everybody to make similar level of effort.
Justifications of Unequal Distributions in an Economic System:
Similar to the various concepts that show the unequal distribution of resources through accounting practice, there are various perspective that have been developed to justify unequal distributions in an economic system. First, the concept of efficiency rather than equality is used as a justification for unequal distributions in an economic system. In this case, resources are allocated differently based on the contributions of workers and competition in the market. Competition and different contributions of employees requires that the market reward harder-working and more innovative workers.
Secondly, individual's free choice is a justification for unequal distributions in an economic system since people are at liberty to select market transactions based on their choices. From a utilitarian perspective, the third justification for unequal distributions in an economic system is the idea of need. A society or economic system allocates economic return and development based on the needs within the particular society (McPhail & Walters, 2009, p.121).
The United States Congress has continued to use different tax brackets and tax incentives for different people since the era of President George Bush. While 2012 was expected to be the final year for the use of these different tax brackets, the U.S. Congress acted to further extend the Bush-era tax cuts ("Federal Income Tax Brackets 2013," n.d.). The Bush-era tax cuts were initially set to expire in 2011 but the Obama Administration prolonged the tax cuts through 2012. At the beginning of the year, the 2013 marginal tax rates were established and affected by elections and inflation. Actually, the establishment of the tax rates was agreed upon after the elections and inflation played a crucial role in settlement of the newly adjusted tax brackets.
According to Perez (n.d.), the 2013 newly adjusted top tax bracket is 39.6% in addition to the new Unearned Income Medicare Contribution Tax of 3.8%, which is applicable to net investment income for taxpayers with an adjusted gross income beyond $200,000 for single and $250,000 for couples. As a result of the adjustments, the taxpayers in the highest tax bracket will be subject to a combine 43.4% marginal tax rate on investment income. In addition, there are various types of income that may be taxed at different rates and special capital gains tax rates that are applicable to long-term investments, dividends, collectibles, and various kinds of real estate.
The main reason for the different tax rates and tax brackets is that the schedules are geared towards tax planning purposes. In order for an individual to know their tax bracket or rate, he/she should compute his/her actual income tax based on the 2013 Instructions for Form 1040 and 2013 Tax Tables. Notably, while every tax rate applies to a series of income known as a tax bracket every tax rate is applicable to a particular range of taxable income. Moreover, taxable income is described as total income after the deductions have been made.
There are various ways an individual can use tax rate schedules to help in planning their finances (Perez, n.d.). First, a person can use the tax rate to identify how much tax he/she will pay on the extra income he/she earns. In this case, a taxpayer in the 25% tax bracket will be subject to taxation at that rate until his/her extra income reaches the next tax bracket of 28%. Secondly, an individual can use the tax rates to identify how much he/she will save through increasing deductions. For instance, a person in the 28% tax bracket will save 28 cents in federal tax for each dollar spent on a tax-deductible expense like mortgage interest. One of the major aspects to consider when planning individual finances is marginal tax rates because they affect or interact with other tax rates like Social Security tax and Medicare tax rates.
While tax brackets and different tax incentive for people are established to facilitate the planning of finances, they do…