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A Discussion On Value Added Tax, Federal Budget Process, Policy Making

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1. To assist in providing new revenues to the federal government, some have proposed a value added tax (VAT) similar to those used in the United Kingdom and Canada. What are the pros and cons of introducing this type of national sales tax?

2. Describe the formal federal budget process. In your view, what are some of the key challenges in this process?

3. There has been considerable discussion about the U.S. debt situation. Briefly outline the current situation and responses available to the government.

4. How does the government affect policy making?

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Solution Summary

A discussion on value added tax, federal budget process and policy making is examined.

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1.
A national sales tax facilitates the government authorities to earn money from sales of consumer goods (Brumbaugh, 2007). Hence, it also considers some pros and cons that are necessary for the governing authorities of the federal government to tackle the situation in effective manner:

Pros of National Sales Tax: By imposing VAT, the government increases its revenues that help to continue the social welfare activities for fulfilling the basic needs of people related to house, food and cloth. With the help of this tax, the government could provide the national agencies for developing the basic infrastructure of country that could help to improve the living standards of countrymen (Hyman, 2007). On the other hand, due to the implementation of sales tax, the government could increase the additional taxes over the individual taxpayers. This tax also helps the government to improve the financial condition of country that would help to fight against the economic slowdown in the world market.

Cons of National Sales Tax: The main disadvantage of national sales tax is that who will collect and deposit it in government account. On the other hand, the national tax also reduces the earnings of poor people, while the poor people already pay some part of their income in the form of taxes (Brumbaugh, 2007). Hence, the introduction of this tax could increase the financial instability of the people that could enhance problems for the people.

2.
The federal government uses four steps process to make formal federal budget as below:

Preparation and Requests: The budget process starts by the submission of budget proposal from the president for next fiscal year that starts from 1st October. The president ...

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