Search This Blog

#201 Balancing the Budget Trough Tax Reductions

The prospects that the US national budget would rebalanced depends on a cut in federal spending. The current budget deficit would have to be reduced. Is that possible?

The current prospects for the US economy is to cut the taxation levels. Such cuts would not be feasible because the current levels of tax revenue are already the lowest among advanced economies.

The USA has the world's largest GDP and the ratio of its public debt to GDP remains at  tolerable levels. However the public debt of China is even lower and its external debt is already the lowest in the world.

Although the total tax revenue of $3.5 Trillion can not substitute for the post COVID GNP gap, increasing individual taxes and some payroll tax reductions will be on the agenda for the new administration. Only 7% of corporate taxes from corporations show a disproportionate allocation of taxation for the dividend-earning part of the high earning population that is not likely allocate income to the growth of the economy.

The top income quintile and particularly the top 1% will be targets for increased taxation of incomes. However, the large accumulation of assets (> 50% of wealth) will be among the top 1% will most likely be the targets. As the workforce declines there will be no incentives to raise payroll taxes.

No comments:

Post a Comment

For comments please e-mail