Tax reform

Taxation
An aspect of fiscal policy
Policies Government revenue Tax revenue Non-tax revenue Tax law Tax bracket Tax threshold Exemption Credit Deduction Tax shift Tax cut Tax holiday Tax advantage Tax incentive Tax reform Tax harmonization Tax competition Double taxation Representation Unions Medical savings account Tax, tariff and trade
Economics Price effect Excess burden Tax incidence Laffer curve Optimal tax Theory Optimal capital income taxation
Collection Revenue service Revenue stamp Tax assessment Taxable income Tax lien Tax refund Tax shield Tax residence Tax preparation Tax investigation Tax shelter Private tax collection Tax farming
Noncompliance Tax avoidance Tax evasion Tax resistance Tax haven Smuggling Black market Transfer mispricing Unreported employment Tax shelter
Distribution Tax rate Progressive Regressive Proportional
Types Direct Indirect Per unit Ad valorem In rem Capital gains Carbon Consumption Dividend Ecotax Excise Fuel Georgist Gift Gross receipts Income Inheritance (estate) Land value Payroll Pigovian Property Sales Sin Single Stamp Steering Turnover Value-added (VAT) Corporate profit Excess profits Windfall profits Negative (income) Flat Wealth
International Financial transaction tax Currency transaction tax Tobin tax Spahn tax Tax equalization Tax treaty European Union FTT
Trade Custom Duty Tariff Import Export Tariff war Free trade Free trade zone Trade agreement
Religious Church tax Eight per thousand Teind Tithe Fiscus Judaicus Leibzoll Temple tax Tolerance tax Jizya Kharaj Khums Nisab Zakat
By country List of countries by tax rates Tax revenues as %GDP Albania Algeria Argentina Australia Azerbaijan Bangladesh Bhutan Bulgaria Canada China Colombia France Germany Greece Iceland India Indonesia Iran Ireland Israel Italy Japan Kazakhstan Lithuania Malta Namibia Netherlands New Zealand Norway Pakistan Palestinian territories Peru Philippines Poland Russia Singapore South Africa Sweden Switzerland Tanzania United Kingdom United States Uruguay

Tax reform is the process of changing the way taxes are collected or managed by the government. Tax reformers have different goals. Some seek to reduce the level of taxation of all people by the government. Some seek to make the tax system more progressive or less progressive. Others seek to simplify the tax system and make the system more understandable or more accountable.

Numerous organizations have been set up to reform tax systems worldwide, often with the intent to reform income taxes or value added taxes into something considered more economically liberal. Other reforms propose tax systems that attempt to deal with externalities. Such reforms are sometimes proposed to be revenue-neutral, for example in revenue neutrality of the FairTax, meaning they ought not result in more tax or less being collected.^[1] Georgism claims that various forms of land tax can both deal with externalities and improve productivity.

Australia

Tax reform is an increasingly significant issue on the Australian political agenda.^[2][3] Combined annual deficits of the Commonwealth and State and territory governments will rise from 1.9% of gross domestic product in 2011–12 to 5.9% of GDP by 2049–50.^[4] Widespread, wholesale tax reform in Australia has not occurred since the introduction of the Goods and Services Tax in 2000. The Henry Tax Review identified 138 areas for significant reform to Australia's tax system over the next 10 to 20 years.

In July 2013, PricewaterhouseCoopers proposed significant tax reform in the context of an ageing population and slowing of the Australian mining boom.^[5] PricewaterhouseCoopers proposed improving the efficiency of the Australian tax system through analysing the competitiveness of the levels of taxation, its effect on production and the importance of broad-based taxes to reduce economic distortion.^[6] For example, over 115 other taxes raise less revenue than one tax: the Goods and Services Tax.^[7] This Report received widespread coverage in the Australian press.^{[8][9][10][11]}

United States

"'Revenue Reform' Train Stopped by 'Vested Interests,' 'Local Issues,' 'Trusts,' and other poles" — Political cartoon from 1880–1900 commenting on tax reform.

There have been many movements in the United States to reform the collection and management of taxes.

During the late 19th century American economist Henry George started a global movement for tax reform whose aim was the abolition of all forms of taxation other than the Single Tax on land value. The effects of the movement on taxation policy, although diminished can still be seen in many parts of the world including Australia, New Zealand, Hong Kong, Taiwan and Singapore. Efforts to promote this form of tax reform in the United States continue under the aegis of organizations such as The Henry George Foundation of America.

In 1986, landmark tax reform was passed in the Tax Reform Act of 1986. In the 1990s, reform proposals arose over the double-taxation of corporate income, with a large report in 1992 by the IRS.^[12]

During the Bush administration, the President's Advisory Panel for Federal Tax Reform recommended the removal of the Alternative Minimum Tax. Several organizations are working for tax reform in the United States including Americans for Tax Reform, Americans For Fair Taxation and Americans Standing for the Simplification of the Estate Tax (ASSET). Various proposals have been put forth for tax simplification in the United States, including the FairTax and various flat tax plans and bipartisan tax reform proposals.^[13]

In 2010, Fareed Zakaria proposed what he described as a "grand bargain" with tax reform for economic adversaries Paul Krugman and Niall Ferguson; an attempt to bridge their political divide with the creation of a simple and indirect Federal Sales Tax.^[14] Representative Chaka Fattah of Pennsylvania introduced a bill, H.R. 4646,^[15] called the Debt Free America Act that would introduce a 1% financial transaction tax and eliminate federal income tax. He has introduced bills calling for similar tax reform since 2004, but the bills have never made it out of committee.^[16]

President Obama’s tax reform proposals are highlighted in his administration’s 2013 United States federal budget proposal and in a framework for corporate and international tax reform presented by the administration.^[17] While some of these proposals have become irrelevant due to the “United States fiscal cliff” agreement at the end of calendar year 2012, these policies present a center-left approach to tax reform. In general, the proposals involve some marginal tax rate increases, some marginal tax rate decreases, and base broadening by closing, canceling, or limiting tax loopholes, deductions, credits, or other tax expenditures for top income earners and corporations. Reforming the tax code is reportedly a priority for the 113th Congress.

Tax choice

Tax choice is the theory that taxpayers should have more control with how their individual taxes are allocated. If taxpayers could choose which government organizations received their taxes, opportunity cost decisions would integrate their partial knowledge.^[18] For example, a taxpayer who allocated more of his taxes on public education would have less to allocate on public healthcare. Supporters argue that allowing taxpayers to demonstrate their preferences would help ensure that the government succeeds at efficiently producing the public goods that taxpayers truly value.^[19]

See also

• Organizations:
  • Americans For Fair Taxation
  • Americans for Tax Reform
  • Americans Standing for the Simplification of the Estate Tax
  • FreedomWorks
• Proposals:
  • FairTax
  • Flat tax
  • Land value tax
  • OneTax
  • 9-9-9 Plan
• Related concepts:
  • Excess burden of taxation (see deadweight loss)
  • Optimal tax
  • Single tax
  • Tax shift

References

Further reading

• Anderson, J. E. (2005). Fiscal Reform and its Firm-Level Effects in Eastern Europe and Central Asia, William Davidson Institute Working Papers Series wp800, William Davidson Institute at the University of Michigan.

External links

• Tax reform at DMOZ
• The Tax Gap collected news and commentary at The Guardian
• Tax Evasion (international) at The New York Times