Public Sector Economics-Taxation - Essay Prowess

Public Sector Economics-Taxation

Public Sector Economics-Taxation

Introduction

Myriad analysts and scholars have attempted to come up or gather information that could be used as a learning material on issues affiliated with the public sector economics and the public finance. A perfect example is the article, “President-elect’s taxes threaten Canadian Competitiveness” by Mathieu Bedard (Bedard, 2016). The article is one outstanding scholarly material that addresses the issue of taxation, a prime element in understanding the public sector economics and the public finance sector. From a definition perspective, public sector economics is considered to be a scope of study that is relevant to one’s daily life including the taxation status in the economy. Public finance, alternatively, refers to the detailed study of the function of the government in driving the economy. The essay intends to conduct a review of the article by Mathieu Bedard by public finance and public sector economics. Hence, it will incorporate a brief summary, critique and a conclusion section.

Summary

The article attempts to Focus at US president-elect’s economic expected economic measures as far as the US economy and taxes are concerned. The article commences by arguing that the economic plan generated Donald Trump could have a scaring-off effect on other international economies like Canada (Bedard, 2016). Despite the fact that Donald’s climate change policies seem to be plain, there are expectations of massive changes in the international trends of investments and those of the United States if the US remains in support of the Corporate Tax rates that are being proposed in the plan. For instance, the article provides that the government will facilitate a cut in the corporate tax from 35 percent to 15 percent (Bedard, 2016). From an economic perspective, this approach is stipulated to lure or bait the economic performance of any potential investors. The article provides that even the American businesses that have been set at the borders of the country are likely to move towards the insides as a result of the conducive tax rates (Bedard, 2016).

It has been stipulated that the US is most likely to get a competitive advantage against Canada whose current corporate tax is approximately 15 percent. Regarding ranking, it is stipulated that the United States is ranked last in the Organization for Economic Co-operation and Development Countries while Canada has the third-lowest rates (Bedard, 2016). However, it is presumed by the author that the United States, after performing the tax cuts would move to the 12th rank out of the total 35 member countries.

The article also features another economic and public finance element that the author identifies in Trump’s plan is the 10 percent tax on the profit repatriation (Bedard, 2016). The author uses an example of Apple Chief Executive Officer’s argument that the current repatriation rate is 40 percent. In reference to the article, some of the companies may take this as a suitable opportunity to move their activities back to the US, a move that will benefit the country regarding the revenue earned domestically from the tax deductions (Bedard, 2016). The article stipulates that these adjustments in the tax rated in the United States may pose an economic nightmare for Canada whose rates have been domineering in the region. It stipulates that failure by Canada to adjust the tax rates would result in most companies shifting to the US resulting in a drop in the investment rate in Canada.

Critique

The article is clearly and thoroughly written in the context of addressing the role of government in steering the nature of the economy. Most importantly, the article provides a contemporary example regarding the nature of the US economy amidst the huge tax rates and the possible changes that could result from changes that are proposed by Donald Trump upon assuming the office of the president. First, the article effectively addresses the issue of corporate tax, the impacts it could have on the competitive economic performance of a country and the role of government in determining and influencing these rates. Particularly, the article uses Donald Trump’s plan to exemplify the extent in which the government has powers to change the public finance and economies.  For instance, the article provides that the current corporate tax rate is rated at 35 percent which is less competitive when compared to Canada’s 15 percent (Bedard, 2016). However, the article provides that it is feasible for Trump’s administration to make changes and drive the interest rates to 15 percent. The example provided in the article is realistic considering that a change in the corporate tax rate influences investors to move into such a region. In that connection, it becomes feasible for the government to maintain and even increase the level or revenue acquired from the corporate sector.

Also, the article provided statistical details that make it feasible to conduct a comparison between Canada and the United States. From a professional point of understanding, it is feasible to determine whether the changes expected in the context of changing the tax rates and the repatriation rates will materialize regarding improved economic performance. However, from a general perspective, the article manages to exemplify the facts effectively.

However, the article, from a contrary perspective, does not make any substantial attempt to feature any demerits associated with corporate tax rate cuts as that are proposed in Donald’s plan. Arguably, the article leaves out the counter element of such a learning material that is supposed to give bias-free information that addresses the affirmative and adverse impacts of government intervention as far as corporate tax rates are concerned. For instance, about the feasible outcomes associated with tax reductions, it may lead to short-run benefits after which the country will be influenced to make external and internal borrowing resulting in an economy that is worse off.  

Conclusion

The article, “President-elect’s taxes threaten Canadian Competitiveness” provides a clear concept of corporate tax rate supported by the case study of Donald Trump and his team’s attempt to make changes in the rates. The arguments provided are also rational including the provision that corporate tax that will be reduced from 35 % to 15 %, as well as, the reduction of the profit repatriation rate that is expected to deplete from 40 percent to 10 percent are reliable (Bedard, 2016). The article, hence, plays an informative role of how corporate tax rates can influence a change in the economy and the role of the government in the process of making this to happen. However, the article fails to address the challenges that may come with the sudden cuts in the corporate tax. Rationally, the drop is more than 50 percent expected to fit within the economy upon their discussion and approval by the house and enactment by the president. In such a scenario, there is a feasibility that the expected outcomes may not substantiate.  

References

Bedard, M. (2016, November 14). Donald Trump’s tax plan threatens Canadian competitiveness – The Globe and Mail. Retrieved from http://www.theglobeandmail.com/report-on-business/rob-commentary/donald-trumps-tax-plan-threatenscanadian-competitiveness/article32832824/