Mexican Tax Reform: Look to the Russian Example
NAVAL WAR COLLEGE NEWPORT RI NEWPORT United States
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Mexico suffers from a high underemployment rate of 25, an extremely high poverty rate of 48, a growing debt, low tax revenues, and low GDP growth. Without bettering this situation, Government of Mexico will likely to neither be able to foster prosperity, nor afford any public expenditures to improve security or the lot of the most unfortunate. The Government of Mexico should follow sound economic theory and historical precedent and adopt a simplified, low-rate, flat tax system in order to improve the quality of life of the Mexican people. Raising tax rates, as economic theory and recent history demonstrate, does not equate with raised tax revenues. Lowering and simplifying taxes, as economic theory and the Russian 2000 Tax Reform demonstrates, will result in increased GDP, employment, real wages, and tax revenues. The Russian example shows that from 1998 until 2005, tax revenues increased approximately 881 and GDP approximately 787 in nominal terms. Also, real wages doubled. Hours worked by primary breadwinners increased 5 to 7 and unemployment dropped from 11.9 to 7.6. By adopting such tax reforms, the Government of Mexico will have better ability to handle the many pressing issues facing them today.
- Economics and Cost Analysis
- Government and Political Science