Taxation is important to the economy of the country, and I will recommend the following changes to the tax system. First, I will recommend that the government should strictly follow the attribute of fairness or equity. Therefore, it will be ideal if everybody is subjected to pay a fair share of taxes. The government should consider both the horizontal and vertical equity. The second most important attribute is transparency. I recommend the government to ensure transparency of tax information to both the taxpayers and various stakeholders. It will allow the taxpayers to know how their money is spent and how the tax system runs.
I will recommend the government to increase the overall tax bearing in mind the pros and cons. The benefit that the government will get by raising the tax is that it will ensure that the citizens are provided with the necessary services. Also, it will ensure the expenditures on the infrastructure are met without the government selling bonds or doing other activities to get money. The con of tax increase is that it will reduce the disposable income of the citizens. Similarly, it will reduce the consumer expenditure, and this will have an impact on the economy.
A progressive tax requires the rich to pay more of their income in taxes (Canto, Joines, & Laffer, 2014). However, I will recommend the government to tax the higher-income individuals more. They should be taxed more since they can make a large contribution, and also it reduces wealth discrepancies since we have a wide gap between the rich and the poor. When the government increases taxes on high-income individuals, most of the money is not spend efficiently. Therefore, the government should also consider how to use the money collected so that they do not go to waste on unnecessary projects.
On the income taxes versus the sales taxes, I will recommend the government not to replace the income tax with the sales tax. The increase in income inequality will always result to reduction in revenue in states that rely on sales tax. Therefore, with careful planning the income tax will grow well and stabilizes with the economy than the sales tax. Both taxes when used properly will generate a large amount of revenue to the government. Lastly, I will recommend the government not to repeal the estate tax permanently. When the estate tax is eliminated, charitable giving will reduce. The government always uses the deductions from estate tax for charitable donations. Second, the estate tax is a source of revenue since it encourages people to work hard and generate income.
Canto, V. A., Joines, D. H., & Laffer, A. B. (2014). Foundations of supply-side economics: theory and evidence. Academic Press.
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