英语论文网

ill required. Democracy tries to limit this coercion by requiring that at least a majority of people favor such enforced action to be reduced on above the freedom of minorities [10] .

Optimal Taxation- Lower the Rate, Broaden the Base

The phrase ‘optimal taxation’ imposes high demands on the research. Has somebody solved what taxes should optimally be? Unfortunately, the answer is ‘no’. Neither have the earlier contributions on theory done so nor will this essay be able to meet such a challenge. Since the time of Adam Smith, and even earlier, economists have thought and written about the effects of taxation. In doing so, they have frequently tried to describe what they regarded as desirable characteristics of tax systems. Smith (Wealth of Nations, 1776, Book 5, Ch. 2) listed “four maxims with regard to taxes in general’:

(i) equality: that people’s tax payments should be in proportion to their income;

(ii) certainty: that tax liabilities should be clear and certain, rather than arbitrary;

(iii) convenience of payment: that taxes should be collected at a time and in a manner that is convenient for the taxpayer; and

(iv) economy in collection: that taxes should not be expensive to collect, and should not discourage business

Optimality of taxes is always, at least to some extent, a question of values. We are a diverse culture with differing philosophical, moral, social, and religious views that influence our perspectives. We are economically diverse as well. Some methods of taxation are more burdensome for one group than for another. Taking into account the essentially negative nature of taxation and our pluralist society, it is difficult to settle on a taxing scheme that is broadly acceptable. Each person or homogenous group of persons feels it in their interest to let someone else pay the burden.

If one naturally would raise the question on: how the ideal tax system would be? Of course the answer should be the lowest possible tax rates on work income, saving, investment, risk-taking, and entrepreneurship. After all, these are the activities that generate income and wealth affecting the life of every person, and thus their behaviors to create a prosperous economy. Also the benchmark for the ideal tax system should be an equal rate as the flat tax [11] . Because of free market competition, the environment would lead to economic growth. And since economic growth has numerous positive externalities there would be an increase in taxable income, and tax system would play a valuable role in moving society in the right direction. A progressive tax on saving and investment is particularly reverse since all economic theories - including Socialism and Marxism - agree that capital formation is the key to long-run growth and higher living standards. As is confirmed by two economists of the American Enterprise Institute:

“high rates of taxation on capital income...stand in marked contrast to the implications of optimal tax theory in the economics literature. Over the past three decades, numerous studies...have concluded that an optimal tax system in most cases will not include a tax on capital. ...A capital tax introduces a distortion into an economy, a distortion that explodes over time. Hence, even a small capital tax will not be optimal. When capital accumulation and economic growth suffer, it is not just high-inco