Tax structures
Taxes are critical to improving the competitive position of the nation as well as improving the living standards of individuals in the country. However, different nations employ different forms of tax structures depending on their suitability. There are three main types of tax structures that can be used by the government; regressive, progressive, and proportional tax structures. Progressive taxes are where individuals pay more taxes if they earn more income. Regressive taxation is one where individuals pay less tax when they earn more income. Proportionate tax is where all individuals pay uniform taxes without a consideration of the amount they gain.
the overall system of taxation in the United States in progressive (McGuire, Wang, & Wilson, 2014). As such, an increase in income increases the amount of tax that an individual is likely to pay. There are seven available tax rates brackets in the US and they include 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%. These rate brackets depend on the filing status of an individual which can be single, married, married filing separately, or head of household.
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Alternative minimum tax is a compulsory option to standard income tax. AMT is triggered by the taxpayers making more exemptions by using common itemized deductions. Alternative minimum tax is critical to preventing the wealthy Americans from using loopholes in deductions to skimp their taxes (McGuire, Wang, & Wilson, 2014). The rules and rates applicable to AMT are distinct from regular taxes and apply to corporations, estates, trusts, and high-income earners.
Presently, there are measures to repeal the present tax reform. In my opinion, the repeal is critical as it will ensure that the wealthy do not evade tax payment. It will ensure that individuals that earn beyond some given amount will pay a certain flat amount of tax. My interviewee, however, thinks that the repeal targets the upper-middle-class instead of the truly wealthy individuals. The tax is disproportionate and will favor the highly rich.
Estate Planning
Before this course, I had varied thought about estate planning. One is that it concerns getting old, death, family and finances. I was convinced that estate planning was critical to helping individuals understand and write wills for their successors or help parents that cannot get married manage their property. However, I have come to learn that estate is more critical for various reasons. Estate planning ensures that unintended beneficiaries don’t end up with assets and it protects families that have young children (Horton, 2017). Importantly, it ensures that heirs are protected overlapped taxes and eliminates messes upon the death of an individual.
Another critical factor in estate planning is having wills. Before this course, I believed wills were the most important. Indeed, wills are critical and sufficient only when the goal is to ensure that assets get to heirs. However, when factors of efficiency in the delivery of assets to heirs are considered, then wills alone will not be enough. Moreover, wills alone may not be sufficient when factors of testamentary intent are added (Horton, 2017). Some of the issues that are commonly ignored when it comes to estate planning include the availability of liquid cash to cover the operating expenses of the estate until it settled and tax planning. Further, the executors may be denied access to the documents which makes it impossible to close up the descendant's affairs. Additionally, the designation which may be used to transfer assets can affect the ability to transfer will to beneficiaries.
There are numerous reasons why people don’t do estate planning. Some people believe they don’t benefit as owners and there are beliefs that no one benefits if the owner is alive. Further, individuals may be scared to death or they may be scared of the thought of other benefitting personally from their assets. There are misconceptions that they are a way of calling for death or a waste of money.
Estate planning is critical; however, a lack of understanding is what deters many from avoiding it. Death is inventible and death tax usually befalls families, business, and partners. Thus, estate planning is paramount and regular audits need to make to ensure the plan is in line with changes both in the present and in the future. The legislation is moving towards removal of estate tax which is argued to be a double tax that families suffer from the death of their loved ones. The estate attorney believes that a repeal of the estate tax will be harmful to economic growth. Instead of the repeal, more emphasis should be put on estate planning to ensure a smooth transfer of property (Reardon, 2017). I agree with interviewee, after all, the removal of the tax only allows individuals that did not work hard to have wealth and power they did not work for.
References
Horton, D. (2017). Tomorrow's Inheritance: The Frontiers of Estate Planning Formalism. BCL Rev. , 58 , 539.
McGuire, S. T., Wang, D., & Wilson, R. J. (2014). Dual class ownership and tax avoidance. The Accounting Review , 89 (4), 1487-1516.
Reardon, D. C. (2017). Estate Tax Planning: Until the Other Shoe Drops. Journal of Financial Service Professionals , 71 (5).
