Describe the current US tax system relative to possible reform/alternatives.

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thanatassa eNotes educator| Certified Educator

What makes the US tax system so daunting and complex is that it actually consists of multiple different systems. As well as federal taxes, there are state and municipal taxes. Income taxes can be charged by both federal and state governments, and there is also a wide range of other taxes such as sales tax, property tax, and various special taxes, duties, and fees. The system is so complex that over 80 percent of Americans use either professional tax preparers or tax preparation software.  What drives this complexity is that taxation serves multiple purposes. As well as being a tool to raise revenue, it can serve various ethical and political goals and also attempts to guide behavior. For example, so called "sin taxes" on cigarettes and alcohol are intended to reduce consumption of potentially harmful substances. Tax breaks may be designed to encourage corporate investment, the shift to renewable energy, or home ownership.

While almost everyone agrees on the need for some form of tax reform, there is little consensus on the type of reform needed. A position supported by many members of the Republican party is that the main priority in tax reform is to reduce taxes on corporations and the wealthy because, in theory, this would increase GDP and "trickle down" to everyone else, a theory that has little support from economists. Another potential type of tax reform, favored by Democrats, would aim to reduce the loopholes which allow the very rich and large, multinational corporations to pay extremely little in the way of taxes. The point of such reforms would be to reduce the deficit and increase tax revenue that could be used for infrastructure and social programs.