How to change the U.S. tax system

Taxes Pictures, Images and Photos
The U.S. has a big problem with their national debt and deficit. The biggest issue with it currently is that there are not enough employed people right now which means less tax revenue for the government. In addition, the corporate tax laws are very difficult to understand. The corporate tax law in the U.S. appears high at first glance, but it is also filled with many loopholes which companies with good accountants use to their advantage. This is how GE was recently able to earn $5 billion in profit and not pay any tax on it…legally.

Instead of this complex system that scares away businesses, they should get rid of all loopholes and then lower the corporate tax rate. The revenues won’t change and will actually increase because more companies will invest in the U.S. since the rate will be more favorable. Another idea is not taxing repatriated money. Big American companies often hold their profits from other countries outside the U.S. They do this to avoid a double tax. However, since the U.S. is not seeing the benefit of this money anyway, they should consider letting companies bring it over and not tax them on it. By doing this it will encourage those companies to use that money at home by hiring new workers and buying assets. It is said that the amount of money American companies are holding outside the U.S. is about $1 trillion.

Finally, the U.S. could look at lowering personal tax rates by introducing a flat rate sales tax. I am normally not a fan of this tax because as a Canadian I am very familiar with it. In Canada there is a 5% federal sales tax plus a provincial sales tax in most provinces (8% in Ontario). However, if the total sales tax rate is 5% or below, this will inject very large amounts of tax revenue for the government to pay the debt and will allow for some decrease in the personal tax rate. While I’m on the personal tax rate issue, the top 2% should have rates go up a little bit to where it was under President Clinton. This only makes sense and will not hurt the economy.

Changing the tax policy in this way will ensure the U.S. pays the debt and will help the real problem which is the unemployment rate.