Economics: Reward Based Taxation System Argumentative Essays Examples
A major problem within the economic environment regarding taxation is the discouragement of people from undertaking activities that result into higher tax liabilities. Not only individuals exude discouragement from undertaking activities that result into higher tax liabilities, also the corporate sector is exuding similar behavior. Thus, the prospects of outsourcing of organizational activities to other countries and brain drain have become an aspect of concern. Thus, towards sustenance of effective tax regime, it is imperative that the government invests into an incentive centric operational approach. The incentive based reforms within the tax system should focus on offering incentives to the most plausible tax payers within an individual and corporate mandate. As such, the diverse high liability activities include selling of assets, earning income within the labor market and so forth. Thus, this paper will evaluate the reforms towards inculcating a reward based tax reform by the government.
First and foremost, the question on the impact of taxation on the behavior of individuals or corporate organization has become a facet of concern. Most fundamentally, the analysis of the magnitude that is aligned to the inefficiency and how the tax system can be designed to ensure efficiency within the market has also become a facet of concern. Thus, majority of the economists have been wondering as to which approaches can be implemented towards ensuring Pareto efficiency. Admittedly, pareto efficiency that denotes making both parties better off without the prospect of making someone else worse off is imperative for evaluation of a more incentive based taxation system,. Admittedly, from the evaluation of the concept of taxation and Pareto efficiency, the sustenance of the diverse conditions that sustain mutually beneficial outcomes towards encouraging individuals to pay taxation is highly daunting due to the concept of efficiency loss. As such, the efficiency loss that emanates from taxation is regarded to in regards to three terms:
Dead weight loss: the concept of deadweight loss is a holistic term for the notion of inefficiency. As such, it is incorporated in diverse contexts that are inclusive of taxation, efficient cist of the monopoly, government regulations and other major problems. As a concept that emanates from the notion of inefficiency within the economic environment, it is imperative that clarity in comprehension and diversification from the notion of taxation.
Excess burden of taxation: first and foremost, within the economic environment, it is clear that taxation results into marginal social cost or the concept of burden on the operational prospects of an individual or an organisation. As such, the moment a government implements taxes on a given commodity or product, the notion of transference of the taxation burden from the producer to the consumer is bound to prevail. As a clear example in the instance that the government wants to collect $2 billion, the collected amount of money is a burden on the taxpayers. As such, the burden imposed on the public results into individuals and corporate’ feeling pressured towards conformity to the taxes set.
Harberger triangle: the notion of Harberger triangle denotes the measure of the deadweight loss in practice. As such the concept of the deadweight loss of a given tax is defined to as the amount of finances that the customers are willing and able to pay. Additional to the tax revenue collected for the individual to avoid the concept of facing the tax. As a clear example, within US, the distortionary tax that results into the raise of $10 million in tax revenue may lead into a deadweight loss of $ 2 million that that implies that the individuals will be willing to pay upwards of $12 million in order to avoid tax.
As such, the above analysis of the deadweight loss entails the equivalent variation that measures or evaluates the deadweight loss. The diverse consumers exude the pain of the tax burden and the associated inefficiency. Hence an evaluation of the deadweight facets is an aspect of plausible evaluation towards comprehension of why individuals or corporates are undertaking high tax activities in diverse countries in which there are better tax levels. Arguably, through the evaluation of the concept of deadweight loss, the economic policy makers can comprehend effective how taxes impact the behavioral aspects of the consumers and the corporates. As such, taxation results into changes the behavior of individuals regarding what they do. Within a normally functional market, people are highly efficient. In the instance that the taxes do not impede on the behavior of individuals, then the evident outcomes are still efficient thus non-existent of deadweight loss. However, the level of the inefficiency emanating from taxation is a function of the largeness of the tax rate coupled with how much behavioral changes as a result of the introduction of taxation. Nonetheless within the extreme cases, the notion of perfect inelastic demand and supply refute the concept of deadweight loss. Admittedly, the implications of tax implementation does not impede on the quantity produced and consumed by the potential consumer market. The non-impact of taxation on the perfectly inelastic demand and supply is bound to result into no deadweight loss. On the other hand, if the demand and supply curves are highly elastic, the concept if big effects of taxes on efficiency is bound to prevail. Thus, from the above evaluation of taxation and the evident dead weight loss, it is imperative that the government invests into tax reforms that focus on encouraging individuals and consumers to ensuring payment of income tax, consuming the diverse products and organizations making more investment within the market. Thus, from an individual perspective, the most plausible approach is the inculcation of reward scheme for organizations that pay the most taxes. The reward scheme that the country government inculcates should be highly substantial and dependent on effective policy statement. A plausible reward scheme should entail:
Tax based incentives for organisations that produce highly elastic goods and services
Investing into a more progressive tax system that focuses on ensuring the extensively rich are taxed within a higher mandate
A 50% corporate tax cut for 3 years for the organisation
Financially based incentives for organisations that maintain all their operations in US
The inculcation of the above approaches is highly advisable for the government since it will spark a more effective approach towards minimization of the deadweight loss. From the conceptual analysis of what denotes deadweight loss, its diverse impact on efficiency of both individuals and the corporate scene is within a negative mandate. As such, the reward based taxation system, mainly through the investment into tax cuts for organizations that produce highly elastic products and services, boosting of demand within the consumer market is bound to prevail.
Tax burdens negate efficiency within an organizational and individual perspective. As such, through imposing taxes on personal income and organizational production activities, the concept of deadweight loss prevails in the economy. Deadweight loss is impactful on the efficiency of individuals and organizations in the market of operation. From the evaluation of US, the concept of taxation has been leading to the deadweight loss thus outsourcing and brain drain of individuals. Thus, towards ensuring incentives for organizations and individuals to operate and work within US, it is imperative that the government incorporates a reward based taxation system. Through the evident recommendations on tax reforms, individuals and organizations will be highly encouraged to operate within US and the concept of efficiency will prevail.