Chapter 1
ACCT 408
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Competing objective result in a complex law structure
*Raising revenue
*Economic considerations
*Social considerations
*Equity (Fairness) considerations
*Politicial considerations
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Raising Revenue
*Fund the cost of government operations (Primary function of a tax system
*In a perfect world, taxes raised by the government would equal the expenses incurred by
government operations
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Economic considerations
*Control the economy (example: favorable depreciation deductions for purchase of business
property)
*Encourage certain activities (example: research and development deductions and credits)
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Economic considerations
*Encourage certain industries (example: special tax treatment for agriculture activists,
development of natural resources, railroad and banking industries)
*Encourage small business (example: ordinary loss deduction on stock in small business)
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Social considerations
*Tax-free medical coverage provided by employers to encourage health insurance
*Tax benefits to encourage additional education and to encourage adoption
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Social considerations
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Deduction of contributions made to qualified charities, to encourage funding of socially
desirable programs by private individuals and companies
*Disallowed dedications for expenditures against public policy (Example: illegal bribes and
kickbacks)
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Equity considerations
Political considerations
*Special interest legislation
*Political expediency
*State and local government influences
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