The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit
The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit
Travis W. Hall
Ashford University
Political Science Capstone Arthur Piervincenti
September 11, 2012
The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit Deficit spending is a government action in which the amount of its expenditures exceeds that of its revenues. In other words, the government spends more money than it receives from its citizens through taxation. While such spending is generally considered necessary in turbulent economic times, recent annual trillion dollar deficits are alarming to say the least. To be sure, continued deficit spending threatens the very fiscal solvency of this country. Though it is reasonable to assume that both Democrats and Republicans agree as to its danger, there has been little agreement between them on how to implement a plan to reduce the deficit. Democrats by and large agree that a deficit reduction plan needs to include increased revenues, i.e. taxes. Republicans insist that the size of government should decrease, i.e. cut taxes. Despite the political volatility these two opposing ideas create, I believe that there is a way in which to do both. The question of deficit reduction then is: What is the most effective way in which to raise revenues and cut taxes?
Overview
The reasons for the partisan disagreement over how to reduce the federal deficit are beyond the scope of this paper. Suffice it to say that the proper mix of budget cuts and increased revenue that Congress needed to implement to start to reduce the deficit resulted, not in legislation, but rather in an arbitrary post-election deadline that blindly slashes discretionary and mandatory spending by trillions of dollars (Kogan, 2011). In effect, lawmakers agreed that cuts needed to be made, but could not determine where and when to make them. In their defense, budget cuts are a conundrum among the electorate as well. Though we are
Travis W. Hall
Ashford University
Political Science Capstone Arthur Piervincenti
September 11, 2012
The Value Added Tax and Targeted Budget Cuts as a Means to Reduce the Federal Deficit Deficit spending is a government action in which the amount of its expenditures exceeds that of its revenues. In other words, the government spends more money than it receives from its citizens through taxation. While such spending is generally considered necessary in turbulent economic times, recent annual trillion dollar deficits are alarming to say the least. To be sure, continued deficit spending threatens the very fiscal solvency of this country. Though it is reasonable to assume that both Democrats and Republicans agree as to its danger, there has been little agreement between them on how to implement a plan to reduce the deficit. Democrats by and large agree that a deficit reduction plan needs to include increased revenues, i.e. taxes. Republicans insist that the size of government should decrease, i.e. cut taxes. Despite the political volatility these two opposing ideas create, I believe that there is a way in which to do both. The question of deficit reduction then is: What is the most effective way in which to raise revenues and cut taxes?
Overview
The reasons for the partisan disagreement over how to reduce the federal deficit are beyond the scope of this paper. Suffice it to say that the proper mix of budget cuts and increased revenue that Congress needed to implement to start to reduce the deficit resulted, not in legislation, but rather in an arbitrary post-election deadline that blindly slashes discretionary and mandatory spending by trillions of dollars (Kogan, 2011). In effect, lawmakers agreed that cuts needed to be made, but could not determine where and when to make them. In their defense, budget cuts are a conundrum among the electorate as well. Though we are
References: Anonymous. (2010). Obama proposes higher taxes for private equity. The Private Equity Analyst. Retrieved from ProQuest Multiple Databases. (Accession No. 197099116) Burman, L analysis. National Tax Association - Tax Institute of America, 223-236. Retrieved from ProQuest Multiple Databases. (Accession No. 195452311) Domenici, P BPC%20FINAL%20REPORT%20FOR%20PRINTER%2002%2028%2011.pdf Hodge, S.A., (2012), April 1 work. Retrieved August 26, 2012 from http://www.cbpp.org/cms/?fa=view&id=3635 Kull, S., Ramsay, C., Lewis, E., & Subias, S Shultz, T. D., Sullivan, D. H., & Gould, M. S. (2011). A value-added tax for America? The CPA Journal, 81(10), 15-23 900317882) The daily history of the debt results (n.d.) Retrieved September 12, 2012, from Urban-Brookings Tax Policy Center website: http://www.urban.org/UploadedPDF/412489-Using-a-VAT-to-Reform-the-Income-