The current United States tax system relies on taxes at the municipal, county, state, and federal levels. There are progressive taxes, such as income taxes, which vary based on how much one makes, and there are regressive taxes, such as sales taxes, which tax everyone at the same rate, regardless of income. The tax system is quite convoluted, especially at the federal level. There are various tax brackets for different incomes as well as tax incentives for families, investors, and small-business owners. Tax reform is needed in order to streamline the process and to make the system fair for all.
The government uses tax incentives in order to reward certain behaviors such as investing, starting businesses, and owning homes. However, these are not feasible for Americans who make below a certain amount of money. Some people view tax reform as doing away with tax incentives. Some Republicans have called for the creation of a flat tax which would tax all income at a certain level. Democrats, on the other hand, view tax incentives for the working class as necessary, and they wish to tax goods meant for the upper class, such as stock dividends and high income, at higher rates. They view this as being a way to make taxation more fair and to level the economic playing field for most Americans. Libertarians wish to abolish the federal income tax altogether; however, they also tie this view in with the idea that many federal programs should be abolished.
What makes the US tax system so daunting and complex is that it actually consists of multiple different systems. As well as federal taxes, there are state and municipal taxes. Income taxes can be charged by both federal and state governments, and there is also a wide range of other taxes such as sales tax, property tax, and various special taxes, duties, and fees. The system is so complex that over 80 percent of Americans use either professional tax preparers or tax preparation software. What drives this complexity is that taxation serves multiple purposes. As well as being a tool to raise revenue, it can serve various ethical and political goals and also attempts to guide behavior. For example, so called "sin taxes" on cigarettes and alcohol are intended to reduce consumption of potentially harmful substances. Tax breaks may be designed to encourage corporate investment, the shift to renewable energy, or home ownership.
While almost everyone agrees on the need for some form of tax reform, there is little consensus on the type of reform needed. A position supported by many members of the Republican party is that the main priority in tax reform is to reduce taxes on corporations and the wealthy because, in theory, this would increase GDP and "trickle down" to everyone else, a theory that has little support from economists. Another potential type of tax reform, favored by Democrats, would aim to reduce the loopholes which allow the very rich and large, multinational corporations to pay extremely little in the way of taxes. The point of such reforms would be to reduce the deficit and increase tax revenue that could be used for infrastructure and social programs.
https://www.taxpolicycenter.org/briefing-book/why-are-taxes-so-complicated
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