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Show Tax revision needed to stimulate economic growth Revision of the nation's tax system is necessary to stimulate stimu-late economic growth in the United States. This was the view of Utah Foundation, the private tax research organization, organiza-tion, in a report analyzing the tax structure and economic growth in the U.S. Presently, the United States ranks last among the major industrial nations of the world in the proportion of gross domestic product going for capital formation and it has ranked next to last in the annual rate of economic growth registered since 1960. Only Great Britain has recorded record-ed a slower rate of growth during this period. Foundation analysts emphasize empha-size that the amount of capital (machinery and tools) available avail-able for each employed worker is an important factor in the standard-of-living differences existing among the nations of the world. Although the United States still ranks above most other industrial countries in the amount of capital per worker, the situation will change if the long-term rate of new investment in the United States continues below that of other nations. The study points out that there has been a steady erosion of the ability of U.S. industry to compete on favorable favor-able terms with business firms from other nations over the past 25 years. During this period, the balance of payments pay-ments has reversed itself from a net surplus to a net deficit. In addition, corporate profit margins in the United States also have declined markedly over the last quarter century. Adjusted profit margins presently pre-sently arc only about half what they were in earlier years. The Foundation reports stressed that profits arc the vital ingredient needed to attract savings for new capital investment. invest-ment. According to the study, "profits, or the hope thereof, serve as the catalyst for expanding the production of more gcxxls and services at a lower cost, thereby creating employment opportunities and raising the standard of living for everyone in the nation." At the present time, the tax system of the United States favors consumption and penalizes penal-izes production. The Foundation Founda-tion churgcs that "by discouraging discour-aging new investments in capital facilities, we forego opportunities to create jobs for an expanding labor force, to raise productivity thereby lowering lo-wering cost, to provide for product innovation and improvement, im-provement, and to allow American business to compete effectively with imports from other nations." It notes that "as investment capital is being choked off, the nation increasingly is being plagued by problems of inflation and unemployment." In contrast to this U.S. is policy of discouraging capital investments, the tax systems of most other nations weigh less heavily on production, apparently recognizing that it is production that yields the fruits not only for consumption but also for future economic progress. Much of the emphasis in government programs during recent years has been geared toward redistributing available income tax to nonproducers through transfers rather than toward finding ways of enlarging enlarg-ing the total economic pie. According to the Foundation study, payments to nonpro- ducers between 1965 and 1976 have been rising 72 faster than payments to the productive produc-tive elements of society. Recently, a U.S. Joint Congressional Committee on Taxation concluded that "a necessary step in increasing the rate of capital accumulation accumula-tion is to make the private sector of the economy more willing to invest in plant, equipment, and other types of capital." To accomplish this objective, the Committee suggested sug-gested the following six changes in the U.S. tax system: (1) integration of the individual and corporate income in-come taxes, (2) liberalization of the investment tax credit. (3) larger deductions for depreciation, (4) a reduction in the corporate tax rates. (5) indexing the tax system for inflation, and (6) more liberal deduction of losses. |