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As you write, you can use the rules in this quiz as reference. Also, I recommend the Online Writing Lab at Purdue (OWL at https://owl.english.purdue.edu/) for additional help.  The MSU Writing Center provides one-on-one and group writing consultations.  If English is not your first language (or even if it is!) I recommend that you take your essay to the Writing Center before turning it in for a grade.

Instructions:  Submit this page with your typed, two page essay.  STAPLE everything together and be sure your name is on it.

This essay is a facts-and-persuasion piece about simplification of the personal income tax code.  On the next page, I have copied a quotation about tax code simplification and I reference Chapter 5 in our Slemrod and Bajika text to provide some background.  After reading these, select two of the simplification ideas I have listed and for each explain (1) the nature of the problem; (2) how the suggestion is an improvement.  Spend approximately one page on each idea – about two well-structured paragraphs per page.

“The resources required to keep records and file returns already cost American families an additional 10 to 20 percent over what they actually pay in income taxes…..Targeted tax subsidies undermine citizens’ confidence in the fairness of the system by treating similar activities differently.  Subsidies that are reduced or completely phased out as income rises create complicated rules and reduce incentives to work and invest more.  Although tax credits reduce payments and make the government appear smaller, this is an illusion.  The intrusiveness of government is just buried in the tax code rather than displayed obviously as a spending program.”

William G. Gale, “Make it Less Complicated to Pay Taxes,” The Los Angeles Times, February 21, 2000.

Simplicity and Enforceability:  How complicated is our tax system?   Chapter 5 of Slemrod and Bakija

Ideas for simplification.  Explain and discuss two.

1.    Make fewer distinctions across economic activities and personal characteristics.  Taxes should be imposed on a broad income base at lower rates that do not vary across sources of income or types of expenditure.

2.    Relieve between 40 and 50 million households of the need to file tax returns.  With small changes in withholding rules, this could be done for households that do not take itemized deductions and have income only from wages, Social Security, IRAs, pensions, unemployment insurance, interest and dividends.

3.    Cut the top rate to 30 percent and tax capital gains as ordinary income.  Lowering the top rate would raise economic activity and reduce tax avoidance.  Eliminating the differential between capital gains and other income would close down a significant amount of sheltering activity.

4.    Raise the standard deduction significantly.  This would reduce the number of households that have to itemize their deductions.

5.    Remove the phase-outs on itemized deductions and personal exemptions that affect high-income taxpayers.  These are needless complications that raise little revenue.

6.    Make the tax credits for children, child care, education and adoption completely refundable, so that low-income households get the full value of the credit even if their income tax liability is zero.  Eliminate the phase-out of these credits as income rises.

7.    Consolidate and simplify all IRAs and related plans into one account with simple and clear contribution and withdrawal rules.

State the proposal you are describing and explain the problem it is trying to solve.  In the second paragraph, explain why it solves the problem or not, or what you think about it.  Think about what the proposal is doing before you write.   Think about what you write as a policy briefing for someone who has taken this class.

Read what you’ve written out loud to yourself to catch run-on sentences, other awkward sentences, and sentences that repeat the points you’ve already made.

Omit “very” from your writing and find a more interesting word.

The plural of IRA is IRAs not IRA’s.  They don’t own anything.

Your writing should reflect what you have learned in this class.  It should read like it was written by someone who has taken almost an entire semester of a Public Economics class in taxation.  Feel free to use terms from class like efficiency, progressivity, etc.  I know what these words mean.

Many of you have written that lower personal income tax rates will spur economic growth.  We discussed both the theory and empirical evidence on this topic – the primary outside reading was Gale and Samwick (G&S).  I expect to read about opposing income and substitution effects, as well as the empirical findings in G&S.

It’s ok to write “I think”!  I’m interested in knowing what you think about these proposals or why you selected the ones you did.

Read through you writing for wordiness.  For example, use “currently” instead of “as of now.”  Shorter sentences are snappier – easier to read and more interesting.

Use the current tense in your writing.  That is, write “tax deductions are itemized in Schedule A,” not “tax deductions were itemized.”

Abbreviations you may see:

AV  Active Voice is preferred to passive voice

e.g.  Passive:  Large tax expenditures are the result of the items listed on Schedule A.
Active:  Items listed in Schedule A result in large tax expenditures.

Frag    Sentence fragment

Details/TPC       Get some information from the Tax Policy Center site.

WP      Which policy are you addressing?

Awk    Awkward – re-write this.

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