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Pros And Cons Of Tax Reform

1393 Words6 Pages

Maryam Tahseen
Dr. Palazzolo
Democracy and the Deficit
September 21st, 2015

Tax Reform: The Possibilities

The United States of America is in dire need of tax reform. Peter G. Peterson, in Steering Clear, introduces various tax reform mechanisms that can possibly boost the economy and spark future economic growth, including increasing tax rates on the wealthy, reforming corporate tax code and implementing a carbon tax, amongst many others. Although all of Peterson’s tax reforms are well-substantiated, the one that aligns the most with his targets of increasing economic growth, reduction of income inequality and solving the perils of the debt crisis is the corporate tax code reform. Not only does Peterson’s evidence provide concrete reasons …show more content…

With the economic recession of 2008, the emergence of China as a global manufacturing superpower and an exponential increase in defense spending, the last two decades have seen a significant change in the United States’ spending and growth patterns. Thus, proposing a tax increase on the basis of a similar decision made more than twenty years ago is not reasonable. Moreover, support of a few people from the Wall Street does not solidify Peterson’s claim of a major tax increase, but rather it compels the reader to question, ‘Who are these people? What is their basis of agreeing with Peterson? What about the others who do not agree with him?’. Without answering these questions, he is effectively making an unsubstantiated claim. Peterson’s statistical figures reveal that the top one percent of individuals and firms contribute 46% to the total individual income tax revenue collected by the government (Peterson 2015, 144-145). Therefore, it can be argued that the wealthy are already paying enough and by implementation of such enormous tax rates, we will steer the investors to other countries with lower taxation rates and a higher chance of profit-making. While Peterson may claim to expand economic growth and increase revenue generation through this policy, his lack of evidence and imperfect comparisons prove …show more content…

Whereas Peterson claims that the carbon tax implementation will address the fiscal and political challenges of the United States simultaneously, his explanation lacks a thorough review of such a policy. His argument about a carbon tax increasing investment in clean-fuel technologies is undoubtedly true. However, it seems that Peterson overlooks the fact that such a tax will potentially increase the cost of production of the corporate firms because of the installation of expensive machinery. Therefore, to lower the costs, firms might actually start making labor redundant to cover for the increased capital costs of installing cleaner technology, leading to widespread unemployment in the country. For implementation of tax reforms - like the carbon tax - with snowball effects, it is important that a thorough analysis of all the possible effects are carried out beforehand to prevent unforeseen circumstances, which Peterson fails to do while discussing this tax reform. Also, Peterson argues that with the implementation of the carbon tax, other taxes will be replaced (Peterson 2015, 154). Again, he leaves the reader questioning what taxes Peterson wishes to replace with a carbon tax in order to evaluate whether such a replacement is even feasible. Moreover, a potential consequence of a carbon tax in the form of pollution permits is the steering away of investors to developing economies with

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