As a follow up to the recent article about tax distribution in OECD articles, I found this blog entry (or, in fact, a series of blog entries) from the Economist that again approaches the idea about the appropriateness and progressiveness of OECD member countries’ tax systems.
Whereas the previous article considers the US tax system the most progressive of any OECD member country, this article displays the more traditional arguments against the US tax system - low corporate tax and low overall tax, even as compared to other OECD member countries.
One idea re-emerges from this article that I consider important to think about and discuss:
First, there is a difference between the percentage of tax imposed on a country’s households and businesses, the numerical value of those taxes collected, and the percentage of total GDP taxed within a country’s system. In almost every regard, the US falls below its OECD companions, indicating that the US might consider raising taxes in order to maintain the public services it requires and to reduce its federal deficit. However, as the article points out, there are certainly economic downsides to increased taxes, particularly on corporations. Corporations can pass of the taxes by raising prices, hiring less people, or by moving to a more tax-friendly environment.
Where would you find the balance between the lowest tax rate among similarly developed countries and the ability to maintain a business-friendly environment for domestic and foreign corporations? Which one, if either, of these possibilities is most important? And, perhaps most provocatively, should the US raise taxes? Now? Later? Never? Let’s open up the floor- let me know what you think!