Public Economics: Taxation - Essay Example

It is important for a president to ensure that the citizens of a certain country are taxed efficiently, a process that is achieved through the policy of who cares, who pays. In this case, it is not relevant whether the seller or the buyer have formal tax obligations since they contribute to the revenue of the state. The government should ensure that the tax proposal instituted has no effect on the revenue, and it is effective in a manner that both consumers and producers share their taxes. However, the division of taxes is essential, as long as the taxes are set through supply and demand (Kolko, 2002).

To ensure that the tax proposal adopted by the business works, it is supposed to rely on the idea that the prices should be determined through supply and demand. This aspect is efficient since the market economy of the United States is very competitive. The prices should be set in a manner regulated by the government and in this case, the person who remits the taxes is considered. Corporate taxation has been described to have a noticeable impact on the economy of a certain government. Tax affects the saving levels through the influence of the after tax rates of interest.

Taxation has a substitution effect; this means that higher tax rates reduce the after-tax return from delayed consumption. The income of a country is affected by tax rates, which means that having a high tax rate in a country contributes to poverty among its citizens. However, the first period of consumption is usually effective, and this minimizes the consumption period and finally corresponds to greater savings (Kahn et al.1989). However, for every country, when the income of its citizens is affected, an opposite impact tends to affect the borrowers who are made better.

This is through high tax rates, in which case the borrowing costs are deducted. The net impact of taxes in a country depends on the combination of the individuals magnitudes. The corporate tax system is suitable in the United States since the corporation tends to minimize the costs of calculating taxable income. There are deductible costs to the salaries and materials, and the interest expenses, with depreciation of capital investments. It is noted that firms do not deduct the amount that is spent on capital investments, but instead they hold on the depreciation of their capital (Faulkner and Gray, 1998).

This tax reform is competent for individuals since there are no dividends deductions paid to the shareholders. However, not all business usually pays the corporate taxes. These taxes are meant to be paid by the subchapter C corporations, and the small corporations are usually organized as the subchapter S corporations. These corporations do not pay the corporate taxes and instead the income flows through their initial owners, and they are taxed under their individual income tax. This form of tax is important for the American individuals, especially those who have a small business (The Journal of corporate taxation, 1994).

The limited liability companies do not pay corporate tax although their owners are taxed directly from the LLC incomes. The Ditto for individual proprietorship and the companies owned by many individuals also have the advantages of evading the corporate taxes. According to the past references, it is evident that United States introduced the corporate