Implications of Taxation on Consumption





Implications of Taxation on Consumption

Taxation refers to the act of an authority body imposing legal charges on sales, purchase, trade, and income on citizens or assets in a bid to acquire funds for the development of the public. Types of taxes include excise tax, property tax, federal tax, and state tax, among others. The tax laws aim to levy taxes to individuals, companies, and property in such a manner that there is some level of equality. For instance, income tax for the rich and the poor should not be the same, for the poor will incur more expense on paying taxes and remain with little for sustenance. Tax reforms have always been a source of heated debate among policy makers in the country because of the various factors that need to be considered as well as the level of complexity involved.

In Tax Reform 2013: It can happen, author Michael Andrews (2013) argues that there have been several attempts in the past decades to carry out reforms in taxation. However, the situation of the government has not always been favorable. The tax reform for 2013 seeks to lower tax rates for corporations and businesses to improve the economic climate of the country. The last significant tax reform carried out was in 1986 and during that time it was easier due to a less complex political atmosphere. He states that the success of the passing of the reform was due to “the leadership of the president and the bipartisan commitment of members of Congress” (Andrews). Andrews argues that the process of forming a tax reform is long, difficult, and involves much debate, but the benefits reaped are long term.

In Tax Changes Coming in 2015, author Susan Johnston (2014) suggests that the changes made in the tax laws at times leaves the consumers confused since they are unable to plan ahead due to an unclear future. She, however, states that there exists several tax law alterations, which consumers can use to make financial decisions in the future. The projected increase of value of goods in the year 2015 will result in the reduced purchasing power of the currency. Thus, the government has taken steps to introduce several tax benefits to consumers. These include reduction of earned income tax, an increase of personal relief to low-income earners. “The personal exemption will rise to $4,000, up from the 2014 exemption of $3,950, but that exemption phases out at higher income levels (beginning at $258,250 for single taxpayers or $309,900 for married couples filing jointly and phasing out completely at $380,750 for single taxpayers or $432,400 for married couples filing jointly)” (Johnston).

Retirement benefits will rise to be able to accommodate comfort in retirement through annual savings. The author states that though they may seem like small contributions while saving, they translate to a significant amount of interest accrued, which is also taken into consideration. Other taxable measures include healthcare, where the penalty for lack of health insurance will be increased to motivate every citizen to be enrolled. Since all of the calculated income is viewed as pension income, employment income and self-employment income, the revised tax rates will affect most of the public with exception of the tax-free limit, which stands at ten thousand and eight hundred dollars per year. In addition, the “flexible spending accounts will allow a higher contribution, as well as the ability to roll over funds into the year, as opposed to the previous regulation that required one to use those funds before the close of the year.

Works Cited

Andrews, Michael. ‘Tax Reform 2013: It Can Happen’. The Hill. 2013: n.p. Web. 21 July 2015. <>

Johnston, Susan. ‘Tax Changes Coming In 2015’. U.S. News 2014: n.p. Web. 21 July 2015.             <           coming-in-2015>


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