Sample Essay on Reviving the America’s Economy

Reviving the America’s Economy

Main Argument

According to J. Slaughter, the International Tax System is likely to reduce the competitive intensity between the multinational firms while increasing the jobs demand. Obviously, the competitive strength of these firms depends on the skills of the American workers. The apparent signs of the economic recessions and the increase in the taxation of the leading companies are not on the verge of saving the economy of America. In fact, this report suggests that $ 122.2 billion tax increase will hamper the foreign operations. Job demand will be higher both overseas and in America. Firms will absorb many employees but remunerate them poorly. In contrast, the American workers will prefer working outside their country where the payments are good and the tax levied on the income is minimal.

The job sourcing translates to outsourcing knowledge and skills. Therefore, when a parent firm expands its territories overseas, it is a complementary but not substitutes to cover up the increasing tax haven for the home and international businesses. The meltdown of payrolls in the private sectors has been evidenced, declining to below 2.4 million jobs.  This situation presents inefficiencies of the policymakers to sustain a reliable paying approaches linked to investment and trade. With the U.S. tax rates skyrocketing at an average of 23%, the looming fiscal deficits of the America’s economy are undisputable. Finally, J. Slaughter underlines that increasing the tax on the overseas businesses will threaten their ability to compete abroad.

Critical Review

Sustaining high standards of living for the Americans will require an economy that is founded on highly dynamic companies. Expanding parent companies to overseas operations has a promising ending. However, the paramount challenge affecting the U.S. economy is to ensure that it remains competitive with other players such as China, Colombia, Panama and South Korea for dynamic, high job creation, and investment.

While tax changes are likely to increase the U.S. economy, according to Obama’s tax proposals, increasing tax advantages does not bring permanent tax credit. Trade theories propose that there are direct links between tax policies and jobs creation. Investments in the foreign market may multiply the jobs for the nationals but increasing tax havens is no excuse to establish a sustainable Gross Domestic Product (GDP). Again, concrete trading policies necessitate private and public sectors to focus on domestically based research, innovations, developments, and managements.

The current economy of U.S. leads to a concern whether the country’s multinational firms should transfer their commercial operations to other countries. Working for the success of this strategy is a significant risk to the federal government since it loses both individual and corporate tax revenues to the foreign countries. For instance, Microsoft and Google Companies reduce their tax effective rates transferring their undertakings overseas countries like Ireland. The zero rate royalties for Ireland is ranked lowest among the OECD countries. However, the tax rules in the Obama’s proposal is likely to incentivize multinational corporations, creating tax evasion scandals and transfer of human power from their firms to the competitors’ side. Linear to J. Slaughter’s views, the above behavior will reduce the global competition that plays a critical role in creating in sustaining the economy of a country.

To many Americans, the chronic trade deficits symbolize an economy that is no competitive particularly in the manufacturing and agricultural sector. The trend has seen America losing billions of its workers, highly skilled and competent, to China, India, and Japan, who are very active in the global trade.

In sharp contrast to the long-standing makers about the unremitting effects of the taxation havens, some recent normative analysis has focused on the beneficial roles of income-shifting tax havens. Economists borrow their arguments from the trading theory, suggesting that an open economy should avoid levying the distorting tax on mobile elements of production. The Americans can benefit from haven-related tax planning since it allows them to tax private entrepreneurs while considering multinational mobile capital. With tax havens, the effective marginal tax for multinational companies is likely to reduce, but not the domestic firms, for any given statutory tax rate.

A tax policy on foreign investment is based on whether the parent firms are transferred or retained profits are assumed to be the marginal sources of the government funds. Economists prefer a fixed dividend payout ratio so that they associate parent transfers to the marginal source of financing foreign investments.  Even though the parent firms controls domestic operations of other businesses, the primary focus should be on maximizing profits. A fundamental principle guiding national tax system is tax neutrality.

A neutral tax system for business income would leave business decisions unaffected by the tax. It means that the American government should levy taxes in a manner that does not affect the taxpayer’s choice of corporate form, the location of the tax base, debt-equity level, and choice of pricing policy within the domestic borders. This capitalization view has the capacity of reducing offshore taxation in the manufacturing sector. Also, Slaughter’s indicates that deducting expenses from the tax payments are likely to boost the profits accrued from the foreign investments and multiply job opportunities for the Americans. Again, to prevent the multinational firms from heavy taxation, the American government should allow these companies to claim credits for the incomes received by the foreign governments. Finally, this analysis shows that complex tax-codes are an obstacle to the operations of the multinational companies as well as economic conditions of the U.S.