Jayford,
I am absolutely no supporter of taxes, and always thought of Anguilla as the dream country - just like Vince Cate, although he had to renounce his US citizenship to break free from US taxes. I know the US has some very strict tax rules for private persons, which are very difficult to avoid. The struggle of Vince Cate made this very clear.
The US economy is roughly 80% consumer spending, and roughly 2/3 of GDP is from consumer spending. That's the highest in the world with Japan second with an economy of roughly 67% consumer spending.
In the US there are several underlying problems today. One is the huge credit crisis, which has folded with people's greatest asset - their home - depreciating in value. Another is how huge subsidies of e.g agriculture (subsidies that are larger than most countries' agricultural sector of their economies), and strict regulation e.g of the energy market - where the US is far behind other comparable nations. Then there is the private health services and retirement model, which is going to cost a lot to improve after all the mishaps where retirement funds were completely drained after scandals and mismanagement. Then there is also the fiscal budget where costs are ramping up every year with more military and defence spending, slashing other badly needy sectors like healthcare and especially education.
The last few years have seen a lot of band-aid solutions like the recent package to consumers where they could spend "the latest federal gift check", but that seems to have fizzled out now. We see increasingly protectionist measures being adopted, and when the US was faulted in the WTO a couple of years ago by European companies because of unfair tax-cuts to specific export sectors in the US, the Bush administration response was "ok, then we need to find another way to give these advantages to our exporters".
In stead of having a responsible monetary policy, the US administrations have just been "printing greenbacks" ever since they stopped the gold pegging because of the Vietnam war. Now the latest US administration has antagonized the whole world, and undercut decades of effort in international commerce and corporation. Instead the Bush administration have been dealing out tax breaks and subsidies like some third world socialist loonies.
Foreign corporations in the US pay a 30% withholding tax, while domestic corporations pay 35% of income above 18mn (with variable rates up to 39% on lower incomes) - alternatively 20% flat tax rate.
However, in many countries there are special social contribution taxes (sometimes well over 10% of employee salary) for employers, and special revenue taxes (sometimes in excess of 50%) - or other product taxes - like in Brazil where a single product may have more than 40 different taxes (second only to Thailand in number of different taxes on products). Therefore, the base tax rate is not always comparable. We can say that large US corporations have at least 20% (flat) tax rate as a rule, but there are many different tax breaks and other competitive measures - like I mentioned as an example for certain exporters etc.
I went to Dubai with a friend of mine who do tanker broking from there, and I got to say that partying there is very good. The UAE is still heavily dependent on energy as a source for income, but of course is a booming centre for foreign investment because of the favourable conditions.
I think increasing the tax burden on most US citizens is detrimental to the economy which is so heavily driven by consumption, but the taxation burden on some of the richer incomes and on many corporations is something that is absolutely necessary, if the US federal government is to get out of the spending crisis with huge deficits - as well as being able to finance the reforms that are absolutely necessary for upholding US infrastructure, education and health service levels. If these concerns are not addressed, consumers will be the ones suffering and ultimately the economy itself, heavily dependent on consumers.
If you say - consumers/the population should fend for themselves - you would ultimately see increased spending because of crime, health issues, social problems leading to less productive society and so on... Benign and responsible/smart capitalism is enabling consumers being a strong participant of the economy - and not just a small upper portion of them - but as many and varied consumers as possible, to withstand the varying conjunctures. Here in Brazil, wages are kept incredibly low - and real income is dropping while the divide between rich and poor is quickly increasing. Consumers play a small role of the overall economy, and crime is rampant - they see no positive future for themselves or their kids.
Taking care of the future healthy conditions of a society is key. Therefore, a stepwise increase in taxation to address the most pressing concerns - is the responsible way to react - as long as federal government and regulation already is part of US society.
