The Optimal Taxation and the Current Tax System

Ioannis N. Kallianiotis
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Ioannis N. Kallianiotis: Economics/Finance Department, The Arthur J. Kania School of Management, University of Scranton, Scranton, PA 18510-4602

International Journal of Economics and Empirical Research (IJEER), 2015, vol. 3, issue 3, 151-164

Abstract: Purpose:The paper discusses the current U.S. tax system, which reduces the disposable income and makes savings negative (dissaving or borrowing). This has increased the debt of individuals and the low taxes on businesses have magnified the budget deficits and the national debt. Methodology:People are borrowing the present value of their uncertain future wealth and their high debt and low income raise the risk and this high risk premium heighten the interest rate on loans, especially on credit cards. Government has to increase corporate taxes and reduce the national debt by lowering government expenditures (military expenditures and national defense). Findings:The current tax system needs to be changed and become optimal, which is necessary to improve social welfare, fairness, and justice in our society. The middle class cannot work only to pay taxes and interest on its debt (redistribution of their wealth to government and banks), due to low disposable income. The disappearing of the middle class will affect negatively the entire socio-economic structure of the nation and after losing its power, it will start declining, as history has shown to us with so many empires that do not exist anymore.Recommendations:We hope the leaders to regain their lost power and lead the abandoned people to their ultimate objective, which is their perfection, and the nation to its highest point of prosperity.

Keywords: Estimation; Consumption and Saving; Taxation; Government Expenditures (search for similar items in EconPapers)
JEL-codes: C13 C22 E21 E43 H20 H50 (search for similar items in EconPapers)
Date: 2015
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