Question

Over the years there has been much discussion about how to raise revenues in this country. Many alternative plans have been put forward arguing that there are much better ways to tax individuals then our current system. As you know these arguments, as you well know are taking hold on the state level. The states are looking at unique ways of both raising revenues and cutting budgets. Colorado and Washington tax marijuana, California taxes tattoos, Georgia is merging many of its state schools to cut duplication at the top, etc. Gambling has been around for many years now. In Nevada we tax sex.

You are to look at the unique ways that many states are using to raise revenues and the alternative methods of taxation, budgeting and so forth and so on. You are to decide if we can use alternative methods of raising revenues on the Federal level.

You are to look at alternative methods of raising revenues and/or cutting budgets. If the tax policies that you look at are paying off or are creating more problems. As you decide to raise taxes or cut budgets look at the impact on the programs that have been cut and those that have been funded. Have politics and political parties and the differing wings related to political parties played a role in the tax and budget problems. Are there any reasonable solutions coming from the political noise? Also look at the impact of sequestration, forced budget cuts, on the budget and revenues. In this paper you are more than welcome to take a position on just exactly how you think the revenue/budget crisis can be resolved. Do you think what the states are doing can be applied to the federal crisis? Do you think a directional change is even possible?

There is no lack of information out there on state taxation, alternative methods of raising revenues, budget cutting etc. You are to be creative in solving the many issues that have arisen regarding budgets, taxes, deficits, etc. Can anything work? Argue forcibly. Create your own solutions.

Answer 1

How to Increase the Tax revenue?

The thing about taxes is that one person's increase in tax is likely to benefit another by decreasing his tax liability or share in tax. Like any socioeconomic issue we have to weigh those costs and benefits and it is no simple task to please everyone.

In my view, Indirect taxes by far is the most effective tax system, with different rates for different products based on "Need- Wants- Luxuries". Wherein basic needs are charged at a lower rate, Wants on comparatively higher rates and Luxuries at the highest.

We can increase the revenue by imposing a indirect tax system in the country, since indirect taxes are consumption based taxes, and will impose a minimal rate of tax on necessities or even can avoid the taxes on necessities. This way tax will be collected from those who are capable to pay and would not get affected much with these taxes. This system is used in many developing countries like India and is huge success.

Is budget cuts an option?

A typical developing economy collects just 15 percent of GDP in taxes, whereas most of developed countries collect more than double of it, an estimate states that developed countries collect almost 40-45% of its GDP in taxes. While developing countries have to spend a lot for becoming a developed country; the question arises that- "Where are the budgets of these developed countries spent?"

The Answer to this is- We Spend almost 3/4th of our budgets on (According to USA budget spend in 2015):

• Social Security, unemployment and labor: 33%
• Medicare and Health: 27%
• Military: 16%

For Fiscal year 2019, the budget spend for Social Security, medicare and medicaid was expected to be around 62% of the total budget, while military spend was around 15% of which 2% were for overseas contingency operations.

We can work on maintaining global peace and try to reduce military spend, which will help us big time in reducing the deficits.

Have politics and political parties and the differing wings related to political parties played a role in the tax and budget problems?

Politics has always been a factor in any of crisis, rather than coming together and working out a stable solution, left wings have always being known for resisting a change, whether it is good or bad and also influencing people about the government in power. With all the parties coming together we can work a way out of this crisis more effectively and efficiently.

Are there any reasonable solutions coming from the political noise?

The noise has always been about what is going wrong, rather than providing a solution, we have been observing political parties criticizing the other one, but it is rare incidence that they give a solution for the problem in hand. By far for this crisis, they have failed to provide any acceptable solution.

Do you think what the states are doing can be applied to the federal crisis?

We can think of levying tax of certain items on federal level in the same manner as state, but it will lead to double taxation in many places and could also give a boost to already spreading social evil. For applying those taxes, we should consider opinions of social thinkers together with the economists.