Recommendation 1
Although the taxation system adopted currently in the United States offers a plethora of opportunities in both everyday and business domains of people’s lives, it needs reconsideration. Specifically, it can be replaced with the Consumption Tax. The concept implies that the tax rates should be reduced, whereas the tax base itself should be broadened. As a result, the foundation for economic stability can be built.
Furthermore, the adoption of the Consumption Tax as the foundation for the current fiscal system will encourage the residents of the United States to change their buying behavior. Particularly, the tax is bound to encourage savings and related practices. The identified changes to the economic environment of the U.S. are bound to have a significant impact on not only the financial issues but also on the social and even the cultural development of the population.
For instance, the current focus on consumption, which the USA residents have been suffering from, and which has led to a range of drastic social tendencies, can be altered toward a healthier lifestyle (Cronin et al. 3). Similarly, the financial relationships between the state and its residents can be improved significantly, with more opportunities for people to engage in lucrative economic projects.
Recommendation 2
The fact that there is a significant gap between the national and the international tax systems (i.e., the U.S. one and the one accepted by the OECD) also needs to be brought up as a reason for concern. Thus, it is suggested that current taxation policies should be revised. Despite the pressure from the OECD states, which emphasize the necessity for the U.S fiscal policy, in general, and the taxation system, in particular, to be aligned with the corresponding provisions of OECD, it is recommended that the taxation system should become more pliable. As a result, the premises for improving the competitiveness of the U.S. in the global economic arena can be built (Leonhardt par. 3-6).
Reasons and Rationale
The use of the Consumption Tax as the Foundation for the state fiscal policy is bound to have a plethora of positive effects. As stressed above, the socioeconomic change that it will trigger is bound to have a dramatic effect on the American market, altering the buyers’ behavioral patterns significantly. Furthermore, the redesign of the taxation system toward a single Consumption tax will help make the tax base much wider as it will make every single resident of the state pay taxes.
As a result, it can be expected that there will be more clarity in the environment of the economic relationships on a national and, perhaps, even an international level (Eleniewski, Nagode, and Trebby 26-28).
As far as the second recommendation is concerned, as stressed above, it is important to create an environment in which the organizations representing different states could cooperate. However, a constructive dialogue may begin even if the American government pursues the current strategy implying that the tax levels should remain in their place. Thus, the state will avoid a financial shock that it will take a significant amount of time to recover from (Cederwall par. 6).
The current American taxation system has clearly worn out its welcome. With the economic environment changing rapidly, new fiscal regulations must be introduced to respond appropriately to new challenges. Therefore, using the tools that can introduce more transparency in the economic relationships between the key stakeholders will be helpful.
Works Cited
Cederwall, Eric. “Making Sense of Profit Shifting: Pam Olson.” Tax Foundation. 2015. Web.
Cronin, Julie-Anne, Emily Y. Lin, Laura Power, and Michael Cooper. Distributing the Corporate Income Tax: Revised U.S. Treasury Methodology. 2012. Web.
Eleniewski, Joe, Doug Nagode, and James P. Trebby. Trends in State Taxation: Consumption Tax Versus Income Tax. 2014. Web.
Leonhardt, D. “Why Taxes Aren’t as High as They Seem.” New York Times. 2012. Web.