US Tax Reform – Term Paper

Question One

Governments play a crucial role in the improvement of the welfare of citizens and the stabilization of economies in various ways. There is need to appreciate the efforts that governments and citizens play in the stability of economies and how they help in improving the quality of lives of the citizens (Hyman, 2014). In order to understand the role of governments in the economy, there is need to understand the goals and priorities of the local government goods and services. One of the goals of the local government goods and services is to improve on equity among the citizens; this is because the process of distribution of goods and services is made not to depend on the ability of the citizens to pay for the goods and services. This reduces the cases of discrimination of the poor citizens and ensures equitable distribution of resources. The use of nonmarket rationing in the distribution of goods and services ensures that all citizens have the ability to access the goods and services regardless of their social status (Tresch, 2014).

The priority of the government goods and services is to improve on the protection of the citizens and to provide suitable economic conditions that enable them to carry out business activities efficiently. Secondly, such goods and services aim at identifying the hardworking citizens and appreciating the disabled by giving them the opportunity to put their optimum efforts for the purposes of building the economy (Pigou, 2013). The final priority is the improvement of infrastructure as the government channels funds to the areas that benefit the public and encourage the building of the economy.

Question Two

There are internal and external challenges in the course of providing goods and services. One of the internal challenges for providing goods and services is controlling supplier processes, this is because it is challenging for businesses to separate the processes that are crucial in the management of each supplier (Hyman, 2014). In this manner, if a company attempts to use umbrella policy when handling disparate systems, there is a high probability of missing the components that are relevant to one group. The second internal challenge in the provision of goods and services is the difficulty in identifying key suppliers. In an economy or any business setting, there are key suppliers that provide direct input into the key processes of business, the key processes on the other hand are those that provide goods and services to the customers and which include manufacturing, product development, sales and marketing. Difficulty in identifying key suppliers leads to delays in product creation which in turn affects customer satisfaction. The external challenge for the provision of goods and services on the other hand is the challenge of maintaining government compliance (Tresch, 2014). This is difficult because there is the challenge of industries conforming to the set standards which makes employees to miss steps during the inspection process resulting to errors in the supply chain.

Question Three

There are various budget stabilization measures and one of such is to tap and save funds that are received during the rainy days in the economy (Pigou, 2013). These are the periods when there is huge flow of cash, fast growth of the economies and great economic performance in the society, by saving funds during such times, there would be availability of funds during the periods of economic recession making it possible to stabilize the budget without borrowing. The second way of stabilizing the budget is to make cuts to discretionary statutorily dedicated funds that are not protected by the constitution. The third way of stabilizing the budget is to extend Corporate Franchise Tax to the entities that are subject to the corporate income tax, such include the LLC’s which have the ability to choose whether or not to be taxed. Finally, there is need to enact the add-back provision for the Corporate Income Tax and engage in the changing of the apportionment formula used in the calculation of Corporate Income Tax and if possible to double-weight the sales (Hyman, 2014).  

Question Four

In order to ensure that there is stability in the economies and enact tax reforms, there are various strategies to use for the success of the whole process. The two common strategies are the enactment of individual income tax reform and the corporate income tax reform (Tresch, 2014). Enactment of individual income tax involves the elimination all or part of the annual individual income and payroll tax expenditures; this is because it helps in allowing various changes in the tax system among them being the lowering of the tax rates. This strategy also helps in the production of additional revenues that in turn help in the reduction of long-term debt. Finally, the strategy helps in improving the efficiency of the economy and improves the confidence of the taxpayers. Reforms regarding corporate income tax on the other hand involve carrying out major reforms of the corporate tax code. Available solutions are such as capping of the overall corporate tax rate, eliminating some or all of the corporate tax breaks to eliminate market distorting special provisions and promoting economic growth (Hyman, 2014). Finally, there is need to reduce corporate tax rate to 15 percent and increase taxes on capital income of the citizens.  

References

Hyman, D. N. (2014). Public finance: A contemporary application of theory to policy. Cengage Learning.

Pigou, A. C. (2013). A study in public finance. Read Books Ltd.

Tresch, R. W. (2014). Public finance: A normative theory. Academic Press.