In First Things First, AIMS Director of Research Don McIver explains how the tax system could be restructured to improve efficiency and effectiveness, regardless of whether simultaneous changes are incorporated to affect equity outcomes.
Public demonstrations highlighting the evident unevenness in income distributions - symbolized by the “we are the 99 percent” slogan - have amplified demands for tax reforms that would produce greater equity while generating revenue. In a previous paper titled We Are the 99%, McIver demonstrated that existing tax and transfer measures produce a far less extreme degree of income dispersal.
Before pursuing tax reform, McIver argues that the government needs to cut spending and get their expenditure in order. He recommends all levels of government immediately and cooperatively review their current and prospective expenditures in an attempt to eliminate excess spending and match remaining spending to the needs of the population demographic.
This spending review should ensure that the level of government delivering a service also collects the taxes or fees associated with funding that service. Ultimately, tax and spending reform should seek to make the tax and spending system as simple as possible. Boutique tax credits and special exemptions should be eliminated wherever feasible.
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