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Taxation: Should there be a different tax structures?

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Should business transactions be taxed differently or should there be a single rule or combined tax structure? Explain and take a stand

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Solution Summary

In a 602 word discussion, the response presents a number of opinions from different sources comparing the US tax structure to several global examples. A simplied and referenced theory of taxation makes a lot of sense. The conclusion discusses whether change is needed.

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An interesting question which brings up a variety of thoughts:

Comparison of rates

Unincorporated business income is taxed under the same progressive system of taxation as individuals are, and therefore pays the same rates of tax. That relates to small businesses.

Business corporations have different rates but the same progressive structure. The highest corporate rate is the same as the highest individual rate, but even that is deceiving because of the way in which profits are distributed to owners (shareholders). It is also deceiving because the differences in legal structure (C Corporation, S corporation and partnership) account for differences in rates.

A recent article states that "Overall, small businesses of all types pay an estimated average effective tax rate of 19.8 percent. Sole proprietorships face a 13.3 percent rate, small partnerships face 23.6 percent, and small S corporations face 26.9 percent. While not directly comparable, the ...

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