Taxesand Fiscal Policy American Tax Code and

Taxesand Fiscal Policy American Tax Code and Proposals for Change The American tax code has always been a controversial subject for American politicians, particularly since the presidency of Ronald Reagan, who focused on reducing taxes for the wealthy, who would then use their extra income in investments intended to increase the production output of the American manufacturing and service industry. Subsequent presidents Bill Clinton and George W.

Bush both decreased taxes during their administrations, as the United States underwent a long sustained economic boom during this period as globalization changed the face of business. President Obama, or possibly his opponent this November, will have to make a drastic change to the American tax system in order to reduce the amount of dangerous national debt which has accumulated exponentially for decades. The following three proposals seek to balance smart economic decisions with the requirement of deficit reduction, each addressing a different option for resolving these two problems.

The first proposal is the most populist, it calls for raising taxes on incomes over $250,000, while enacting budget cuts of 4 trillion over ten years. This proposal would raise more income for the government, while finding areas to cut at the same time, which would make a huge dent in America's problem of increasing debt.

The highest income bracket, the bracket that makes most of the purchases as well as decisions in the United States, will have to be persuaded to accept a tax increase on their wages, a battle not easily won. If this tax system is adopted, however, it is a great compromise that will allow for minimal tax cuts while still reducing the national deficit by a large amount.

The second proposal calls for lowering taxes universally from 35% to 25%, while reducing spending by 6 trillion over ten years, an even deeper cut in the federal government than the first proposal. This is a very conservative statement, which would greatly boost the after-tax income of most Americans, but would starve the government for necessary services. Definite cuts in military spending, as well as Medicare and Medicaid would be necessary, which would greatly hurt many elderly and needy Americans, as well as the military.

Because of the reduced taxes, the overall national debt would not be reduced, even as spending is lessened by the federal government. The third proposal is for the simplification of the tax system, taking away many of the benefits built in for certain industries which amount to 3 trillion over ten years. A further 3 trillion in cuts would be the shallowest cut in the federal budget of the three proposals.

This option would not change inherently any of the tax brackets from where they exist now, but may hurt some industries, which rely on tax.