The structure of the US Tax system is such that 82% of taxes collected are from payrolls and individual tax payers. Yet the US ranks among the lowest in countries tax revenues as a % of GDP, [only Chile and Mexico are lower}.
This means that the US has been one of the countries with the most operating leverage to an economic rebound when it comes to tax revenues. During the Reagan administration tax revenues as percentage of GDP were 19%, while now under Obama they have fallen to 15.7%. The main reason for this is the recession of 2008-2011. However, if the US is to balance it's budget, it may have to raise taxes to near the OECD average of tax revenues as percentage of GDP, [approx 33-34%]. The political debate in the US seems incapable of addressing this maturely. As an aside it is important to note that a highly developed and successful economy like Denmark has almost 49% tax revenues to GDP. While no-one is advocating taxes at 50% of GDP, it is perhaps instructive to consider:
1. That if Corporations are individuals as famously defined by the US Supreme Court, they need to be taxed as individuals. At the moment less than 9% of tax revenues come from corporations in the United States;
2. Corporations benefit from an enormous number of tax preferences over individuals, including the ability of not being taxed on overseas income not remitted to the US, while individuals pay taxes on world-wide income, subject to double taxation relief treaties. Corporations also have many deductions that are not availble to individuals, including amongst others, taxes deduction on all interest, not just mortgage interest, as well as incentives on capital investment. One possibile way to fund the deficits, is to provide corporations with a tax amnesty for bringing funds back to the US for investment in new capacity, something that has been aired but never really brought to the mainstream debate;
3. High school graduates income levels have fallen 14% over the past 10 years, while the top 1% have their after tax incomes rise by 250% over the past 40 years.
The new Gnostam Consultings presentation highlights these facts which are seldom addressed in the current debate.
More details can be found on www.gnostamconsulting.com