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A white paper is an authoritative report or a persuasive piece that is written by government by interest groups and government agencies to influence government policies and legislature. White papers are usually formulated to address specific issues or problems that exist in government policies or laws. White papers are formulated to educate the general public and interested groups on problems that exist within a government’s policies and how these papers can be used to help these people make important decisions.
White papers are usually used in policymaking, political decisions and in the corporate world where policy makers involve the use of academic institutions to write white papers that will address policy developments.
The Commonwealth of Nations defines a white paper as an informal parliamentary paper that is used to address government policies and issues/problems that might arise due to the implementation of these policies. White papers are usually issued by the government and they lay out policies and action plans that will be used to address certain issues as well as propose suitable alternatives to the problem.
They are developed to signify a clear intention on the part of the government entities and interest groups that want an amendment to government policies.
Examples of white papers that have been written in the past include Winston Churchill’s White Paper of 1922 that was meant to plan a national home for Jews in Palestine, the 1969 white paper that was meant to abolish the Indian Act in Canada, and the White paper of 1966 that led to the development of emergency medical services by the United States National Research Council.
The white paper that will be developed for this essay will address a national issue that threatens to affect the livelihoods of citizens in America which is an increase in taxation. The government white paper will address the issue of increasing taxation what alternatives can be used to address the budget deficits being experienced by the American government (Congress, 2010).
Definition of the Problem
The recent global financial crisis as well as the war on Iraq had a negative impact on the economy of the US. The stock market faced a serious decline as mortgage lenders and banks faced foreclosure as a result of increased consumer and government spending.
This forced the US government to develop a plan that would be used to deal with the financial situation, a plan that involved increasing taxes to deal with job losses and job cuts as well as increase middle class tax relief to middle income earners.
This tax increase proposed by the Obama administration would see taxes increasing by $970 billion on Americans who earned more than $200,000. People who earned less than $200,000 would face new tax cuts that would amount to $143.4 billion in one year. The tax propositions were also meant to eliminate any preferences for oil and gas companies as well as life insurance products (Graetz, 2007).
Businesses under the new tax proposition would face a net taxation increase despite a gross tax reduction of $93.5 billion.
The tax proposition however faced some criticism with the Senator for Iowa, Charles Grassley commenting that the tax cuts and tax relief proposed by the Obama administration would target people who did not have to pay any taxes at all, meaning that tax relief would be directed to limited groups of people in the American population. Senator Grassley noted that the tax increases would have a minimal or no effect at all on the tax relief that was proposed by the Obama administration.
Many American citizens viewed the increase in taxes to be an unwarranted move by the Obama government given that the country was still recovering from the 2009 financial crisis and many Americans were still jobless as a result of being laid off (Donmoyer, 2010).
The tax proposal by the Obama government was therefore faced a lot of criticism from both government entities, American citizens and other interest groups in the United States.
The administration proposed $3.8 million spending plan that would be used in implementing the tax proposals that would prevent US companies from shifting their off shore profits. Many US corporations such as Redmond, Microsoft, Caterpillar and General Electric Company viewed the tax changes to be an impediment to their ability to compete with foreign companies (Sloan, 2010).
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Proposed Solutions to the Problem
The United States Senate Finance Committee decided to act on the Obama administration’s tax proposal by pledging to act quickly on tax legislation that would stimulate hiring. The Senate Finance committee Chairman, Max Baucus, together with Charles Rangel who is a New York Democrat, pledged to act quickly on the tax legislation to ensure that there were tax reforms within the country.
The new taxation laws would see American businesses in the global market being more competitive and viable for investments by other countries. The new tax laws would also see individuals earning more than $200,000 facing a tax increase of 39.6 % up from 36 %. The capital gains and dividend rates for people who earned more than $250,000 would face an increase of 20 %. The tax proposal in general would take from the rich and give to the poor within the American population (Donmoyer, 2010).
Other alternatives to the increased tax proposal that were proposed by Republicans to boost the economy and stimulate job growth within the United States include the alternative stimulus proposal.
The cost of the Republicans alternative stimulus plan was estimated to cost $478 billion US dollars which was a considerable amount when compared to the Obama administration’s tax proposal that was going to cost $1 trillion dollars to implement. Under the alternative stimulus plan, the Republicans proposed that the income tax rates be reduced from 15% to 10 % and from 10% to 5 %. The plan also proposed for tax extensions for the middle-income families that had higher taxes.
The alternative stimulus plan also proposed a tax deduction for small businesses of 20 percent that had an employee base of less than 500 workers as well as a tax deduction for employees who did not receive any tax preferred health care insurance (Pelofsky, 2009).
An alternative to the tax proposal that has been tabled by the Obama Administration is a minimal taxation policy that will allow for the taxation of the investment interest that is necessary in computing regular tax. The investment interest is an interest expense that is incurred by individuals or companies who purchase or make investments. An example of an investment interest is a margin loan that exists in a brokerage account.
The interest expense that exists in the investment interest is subject to tax deduction based on the extent to which a taxpayer has an investable income. The alternative minimum tax alternative to the tax proposal will see regular tax deductions being calculated differently (Armey, 2010).
The alternative to the proposed tax reforms ensures that taxation on American citizens, earnings is conducted in a fair and simplistic manner. The current tax codes and policies that exist on taxation in the US are complex and unfair in nature and they have generally failed to meet the priorities of the country.
The alternative minimum tax alternative ensures that there will be a reduction in massive deficits that have arisen in the past thereby strengthening the middle class while at the same time ensuring that every American citizen at every income levels was able to survive on their earnings, The alternative will also ensure that the American Multinational corporations do not loose out their business to foreign international companies (Armey, 2010).
Limitations and Support for the Tax Alternative Policy
The alternative tax policy however faces some limitations in that it does not cater for shared prosperity and the rewarding of hard work. The taxable incomes under the alternative minimum tax policy do not cater for the taxation of all income levels but the taxation of specific income groups that earn more than $ 275,000 in one year.
This policy will therefore benefit the middle and the lower income earners ignoring the taxation needs of the rich and well to do members of the society.
The Center for American Progress addresses the political and economic reality of taxing every individual based on the income levels by proposing an alternative to the tax policy and proposal that would see American citizens being taxed based on a rate schedule (American Progress, 2005).
The alternative taxation policy is however a more superior alternative to the Obama administration’s taxation proposal as it will involve a minimal budget to implement the reforms within the taxation system.
The plan will ensure that American multinational businesses do not loose out their business to foreign-based companies from other countries by ensuring that their investment expenses have been deducted according to their earnings. The alternative policy ensures that multinational taxation changes will have a direct impact on job growth in the United States as well as economic growth.
The institutions that can be used to support the alternative taxation proposal would include the US Senate, Multinational Corporations affected by the Obama administration’s tax proposal, the Public Revenue Authority and the Government accountability office in the United States (Wolverson, 2010).
This essay has dealt with the white paper issue of increased taxation on the American citizen’s income as well as a taxation of multinational corporations. The proposed tax proposal by the Obama administration presents many problems in that it does not improve job growth within the country and it does not address investment expenses that would be beneficial in improving the economy of the country.
The alternative tax minimum proposal bridges the gap that exists between the proposed taxation policy and job growth within the United States as well as ensuring that US multinational companies do not lose their business to foreign owned companies. The alternative tax proposal will cost less to implement by the government and it will ensure that the economy of the US has been stimulated for positive growth.
American Progress (2005). A fair and simple tax system for our future. Center for American Progress. Web.
Armey, D. (2010,). Rangel’s alternative minimum tax proposal. America Unbound. Web.
Congress (2010). Congressional record, volumes 109-122. New York: Government Printing Office
Donmoyer, R. J. (2010). Obama budget seeks $1.9 trillion tax rise on richest. Bloomberg. Web.
Graetz, M. (2007). Tax reform unraveling. Journal of Economic Perspectives, Vol.21, No.1, pp 69-90
Pelofsky, J. (2009). US house Republican alternative stimulus proposal. Reuters. Web.
Sloan, S. (2010). House Democrats eye changes on tax deal. Congress organization. Web.
Wolverson, R. (2010). US multinationals and tax reform. Council on Foreign Relations. Web.