Key words: tax, tax system, tax reform.
It is impossible to carry out new transformations for the purpose of steady development of the economy without formation an effective tax system. Tax reform is a process which changes tax policies of the government. It is known that there are different goals of this process such as reduction of the tax level of all the people, changing tax system for more progressive effect, simplification of tax system. A good tax reform can improve the life of many people.
1.1. Significance of the study
This research paper discusses one of the most important issues in the development of the economical system – tax reform. This issue is an actual one not only for the United States but for any country of the world because financial sector plays a key role in the present day development of the economy. Tax reform is a main tool of the governmental control. In the context of tightening business competition there is a necessity to take appropriate measures in getting over the consequences of the financial and economic crises 2008-2009. So, tax reforms have such functions which will help to stimulate economical growth and innovative activity, and to increase social protection.
1.2. Definition of terms
In order to conduct a good research on tax reforms it is necessary to represent some economical terms which will be used in the process of research. They are the following ones:
Taxes are payments which are made by the natural and legal persons (enterprises, organizations and citizens) for the government revenues in mandatory manner. It is a duty of everybody to pay taxes. Taxes are necessary because by means of taxes the government has an opportunity to control some economical processes in the country.
They help to develop and reduce some kinds of business, to guide the development of these or those brunches of industry, to influence the economic activity of some enterprises and organizations, to balance consumers supply and demand, to regulate the amount of money in circulation.
Tax system is the total of taxes, fees and other obligatory payments which are taken according to the legislative acts. The main characteristic features of any tax system include the following ones:
the total of taxes fixed by the government;
the complex of principles, forms and methods of their putting into operation;
the system of tax authorities, forms and methods of tax control;
rights and duties of the participants of tax relations;
order and conditions of the tax process. (Roach, 2006)
2. Discussion themes
This research paper touches upon the themes which are closely connected with the topic of the paper. It discusses issues and problems with current system in the United States. Moreover it gives some new ideas for tax reform.
2.1.Some Facts from the history of Tax Reforms in the USA
According to the historical data, there were a lot of various movements in the USA which had the main goal to reform the collection and the management of taxes in the country. Thus, the Whiskey Rebellion which took place in 1799, is considered to be the first effort to carry out tax reform in the USA.
From the historical sources we learn that George Washington who was the US President at that time sent about 13000 troops to the western part of the state Pennsylvania in order to put down the rebellions. Another significant movement against tax reforms took place at the end of the 19th century.
Henry George, who was an outstanding American economist of that time, was at the head of that movement. The main goal of that movement was to abolish all forms of taxation other than the Single tax on land values. He offered this single tax in his book Progress and Poverty in 1879.
This plan was not put into practice although it got support. This movement on tax policy was spread not only in the United States but also on Australia and New Zealand. However, the organization which is called The Henry George Foundation of America continue to promote this form of taxation reform. (Barker, 1985)
It is known that several organizations in the United states are engaged in tax reform in the country among which are Americans for Tax Reform, Americans for Fair Taxation, Americans for Responsible Taxes. These and other organizations have already promoted some ideas concerning tax simplification in the United States which include Flat tax plans, Fair tax and bipartisan tax reform proposals. (Tuerck et al., 2007)
2.2 The Structure of Taxation in the United States and its meaning
It is known that the system of taxation in the United states is a progressive one. It means that the percentage of income which is paid by the household will increase with the increasing income. In other words those people who earn more will pay a higher rate of taxes. Here is an example:
A person earns $100,000 a year, he will pay 25% of it – $25,000.
A person earns $30,000 a year, he will pay only 10%tax rate – $3,000.
However, there may be also regressive and proportional tax systems.
Some Reasons for using the Progressive tax system in the USA:
Progressive tax system stands for the concept that those people who earn more should pay more tax rate because they have more opportunities to pay and they will not forego the most necessary things such as health care or education.
Reduction of inequalities in the society. (Roach, 2006)
2.3. Different types of taxes in the USA
There are several different types of taxes in the United States. All these taxes are collected by the Internal Revenue services. They are the following ones:
Corporate taxes. These taxes are based on the company’s income per a financial year.
Investment taxes. These taxes are usually paid when a person receives some dividends and capital gains. (Smith, 2010)
There are also some other types of taxes which are paid by the individuals: income tax, sales tax, property tax, social security tax, medicare tax and others. (McIntosh 2010)
Taxes on business include federal which include four groups: income, self employment, payroll and excise, state which include common state business taxes (sales tax, employment tax and business income tax) and local which are collected by cities and counties in order to supplement services for this or that area. (La Rose, 2010)
2.4. Problems with the Current Tax System in the United States
The US Tax System is considered to be a complex one. It has its peculiarities which differ it from the tax systems of other countries of the world. However, the US Tax system has both advantages and disadvantages. The last ones require certain changes. Here is the list of problems with the current Tax System in the United States:
A fabulously complex tax system with numerous layers of taxation on the same money: taxes on income and salaries, ans savings. According to the statistical data, four of five middle-class Americans pay more in payroll taxes than in income taxes. (Walby, 2008)
High rate of unemployment (about 10,3 million persons).
Little of the mortgage interest deduction refer to those people who are at low and middle level of income.(Walby, 2008)
About 18% of taxpayers have got out of the system. The income taxes fail to take the cash payments and other unjustified transactions concerning illegal immigrants.
The income taxes assist imports over the US production by excluding imports from Us tax and it penalizes the US exports giving an opportunity to some foreign countries to impose taxes when our goods are delivered to their shops. This fact damages the US exports and even costs the Americans their jobs. (17% price advantage over the US goods.)(Tuerck et al., 2007)
The income tax system puts the highest corporate tax rate enforcing companies to be located in other countries.
Great problems with education, many students do not know about the financial aid which can be given to them. College education became too expensive. College graduates have debts of more than $19.000 when they leave college.
A great deal of manufacturing jobs were lost due to breaking out the US manufacturing trade deficit. (Arduin, Laffer
The Categories Of Multinational Corporations Economics Essay
Horizontally Integrated Multinational – In this type a multinational involves itself in the production of essentially the same product but in different countries. The main object here is for the corporation to continue to grow by the means of expansion into many different types of new markets.
(2) Vertically Integrated Multinational – Here the multinational commences various stages of production in other different countries. The essential motive behind this growth strategy is for the corporations to be able to obtain or have more control over the costs and to reduce the uncertainty of the business environment.
(3) Conglomerate Multinational – In this strategy the multinationals produce a different range of products in different countries. By this diversification process, conglomerate multinationals looks to spread risks, and maximize returns by careful buying of assets overseas.
Characteristic of Multinational Corporations Giant Size – Multinational Corporations are gigantic in size. They also make super normal profits.
International Operation – Even the institution may hold the key to control, it’s interests and areas of operations encompass many other nations.
Oligopolistic Structure – Due to mergers