Tax reform refers to a number of different things. It can be described as a broad process that seeks to modernize the taxation regulations in order to make it more affordable and more effective, while at the same time reducing its overall effect on the economy and people in general. Tax reform is essentially the process of restructuring how the government collects or manages taxes and is generally undertaken in order to give more social or economic benefits to the people or to increase tax administration efficiency.
If you want to understand the process and what tax reform entails, then you will need to first have an idea about how the federal government manages fiscal policy. The federal government’s policies regarding taxes involve several important aspects such as, income taxation, corporate tax, individual income tax, and payroll tax among others.
The basic principle behind income taxation is basically the concept of tax collection based on taxable income. This is why it is commonly referred to as tax revenue. The principle behind this is that the amount of taxes that are collected by the government are directly proportional to the taxable income of an individual or group of individuals.
The main purpose of income tax is to help in keeping a check on how much income an individual makes and to determine the overall tax liability of an individual or organization. In addition, income tax also serves as a source of finance for the government in terms of providing various social benefits and in terms of making sure that the budget of the country does not get out of hand.
Corporate tax is mostly implemented as a method of encouraging business development and growth. Corporate tax collections are collected through the application of several different principles such as, the size of the corporation; the nature of the business it operates; the products it manufactures; the capital stock of the corporation; and any other details that may be specified by the tax authority. Corporate tax collections in the US are also largely effected through the implementation of tax laws that apply to large corporations.
Taxation of individual income is primarily carried out through the application of the income tax. The basic principle behind this is that individuals and groups of individuals are required to pay taxes on any of their income regardless of whether it is earned from a job, an investment, or from any other sources such as interest, dividends, royalties, rents and so on so forth.
