Benjamin Franklin said there were only two things certain in life: death and taxes. And as something that is put to comparison with death in its certainty; most people fear even the mention of taxes the same as its counterpart, but it does not have to be that way.
Taxes are considered as a form of a membership to the society, for the person to become of service to their society. To foster economic growth and development governments need taxes since they are considered as a public service fee that covers everything from health, education, social security including pensions and medical care, to infrastructure growth, such as waterworks and roads, as well as to policing, fire-fighting, and national defense.
Taxation not only pays for public goods and services; it is also one of the main elements in the social contract between the taxpayers and the economy of the society.
How taxes are gathered and used can define a government’s legitimacy. Holding governments liable supports the efficient administration of tax returns and, more broadly, good public financial management.
These services are considered essential in our day-to-day lives, but they cost money. For that reason, taxes are collected to fund these public services. For everyone to help each other creating a better society, and yet it is highly important that tax load must be carried justly and widely over the members of society.
Taxes are compulsory contributions that each and every person has to pay in order to raise funds for the development of the nation.
Taxation in a fair manner while considering the different levels of income increases economic growth in the long run and encourages individuals to do more work, save, and invest. It reduces the budget deficit in the country and the dependence on foreign aid, which is an unstable source of revenue for the country.
Taxation when done right; helps international governments to fulfill their traditional functions of providing some goods and services. And organizes trade activities in a manner that preserves the economy. And it gives the government greater flexibility to control development work; by designing a schedule that helps improve the economic environment within it, and last but not least helps to set the appropriate conditions for attracting foreign investment.
While higher taxes may lead to negative effects on the general economy, for example, corporate and shareholder taxes reduce investment incentives and build capital, which in return affects the volume of investment, and consequently a decrease in the number of productive workers, and a decrease in wages.
Higher taxation for higher-income earners reduces educational returns; because high incomes are linked to higher education levels, this leads to a lower incentive for human capital formation. The higher the level of taxation, at the level of personal income, which reduces the incentive to work.
The following is a list of the most common types of taxes:
Income tax: it is a tax required by individuals or beings that ranges with respective income or profits. Income tax generally is computed as the product of a tax rate times taxable income. Taxation rates may vary by type or characteristics of the person paying it. The tax rate may rise as taxable income rises, and it is presented to the government.
Corporate Tax: A corporate tax, which is also might be called as the corporation tax or company tax, is a direct tax required by a jurisdiction on the annual revenue value, or assets of corporations or comparable legal entities. Many countries command such taxes at the nationwide level, and a related tax may be commanded at state or local levels.
Property tax: A property tax or it may be called millage rate is an ad valorem tax on the worth of a property, normally levied on real estate. The tax is levied by the executive authority of the jurisdiction in which the property is located. This can be a national government, a federated state, a county or geographical region, or a municipality.
Goods Tax: Or it may be called sales tax, it is a tax paid to a regulatory body for the sales of certain goods and services. Normally, the laws allow the seller to solicit funds for the tax from the customer at the time of purchase. When a tax on goods or services is paid to a regulatory body directly by a customer, it is normally called a use tax.
Customs Tariff: A tariff is a tax on imports or exports between different states. It is a form of management of foreign trade and a policy that taxes foreign products to support or safeguard the domestic industry. Traditionally, states have used them as a source of income.
In this research proposal, we are directing the effects of the taxation system on the health and education sector. In the health sector, healthcare taxes are used to pay the doctors that treat patients in the hospitals, developing hospitals, health insurance, and such, and in the education sector, it is used to pay for school funding, a prime example for that is the monthly payment for public teachers that guide the students, to cover up the cost of maintenance and building for school facilities and such. Taxes are necessary for the development and maintenance of these two sectors that are considered essential for the overall wellbeing of our society and to our day-to-day lives.
Therefore, we ask the question of; how does the taxation system affect both the health and education sector? And we expect by answering that question in this research proposal; we will be able to reach an answer that serves both as a notice of the importance of the tax system, and shed a light on the beneficiaries who are in this paper are the health and education sectors, and whether the tax system has served its purpose or not.
Accordingly, the aim of this research will be to discover the effects of taxes on the health and education sector, and to find out whether these effects are positive or negative, do they require more taxes or less, and to overall find solutions if there are any challenges ahead by the answer to that question.
By the end of this research, we expect to find if the tax system effects on the health and education sector are prominent, whether they could be positive or negative, and if more tax funding is required or not.
In a study made by John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler, about ‘the effect of tax preferences on health spending’.
It has shown that: ‘The tax preference for health insurance is likely a key cause of inefficiency in the U.S. health care system. By making health spending in general, and insured health spending in particular, appear less costly than they are, the tax preference gives employees an incentive to take compensation as health insurance rather than cash — even if the value of the spending to the employee is significantly less than its cost to society.’
The tax system for the health sector comes ineffective when it comes to health insurance. And to elaborate on that, Nancy T. Greenspan and Ronald J. Vogel; ‘Tax subsidies for private health insurance continue to cause increased demand for health services, which in turn result in higher prices. As long as this is the case, government health programs will have difficulty competing with the private sector.’
Therefore, proving that the taxation impact on the health sector is significant, although there are some areas that need prompt attentiveness such as health insurance which the taxation on varies whether is the company is private or governmental.
‘Individual investments in human capital can account for 73% of the estimated intergenerational earnings elasticity in the United States. Taxation and public education expenditure have a significant impact on earnings persistence through their impact on individual investments in human capital and are significant contributors to the cross-country patterns that empirical researchers have found.”, Hans A. Holter.
Taxation and investment in public education show that it has a significant impact on earning because of their impact on the individual’s investment which in a way is beneficial to the economy as well.
There are positive economic impacts of education spending start with direct spending on the education budget. For example, it includes coverage for teachers, managers, and additional education-related employees; wages for transportation, school safety, environment, and facility maintenance; and purchases of school supplies, materials, tools, and business services.
These direct spendings effects in return generate indirect effects. For example, the wages of school workers sustain consumer spending in the community; developments of school buildings contract local development and maintenance services, and school shopping could make as sales for local businesses.
The negative economic result of taxes begins by taking money out of the pockets of individuals, decreasing household procuring power, and reducing the need for local businesses’ goods and services. Met with decreased sales and declining profits, those local businesses lessen their own investments and salaries, and that in return directs to further cuts in spending in the community.
Therefore, taxation has a significant impact on society as well, because the more tax funds go towards education, the more it is proven that it comes back beneficial on the individuals.
The research motivates into pouring more tax funds in the health and education sectors, by aiming to find the impact the taxation system has on both of the sectors and where it does fall short or lacks for prompt attentiveness in future studies and actions towards it.
The health and education sectors go hand in hand in their importance to any society and the overall economic health, and tax funds are a major factor in funding those areas.
Although there are some issues on the taxation impact on the health sector in the health insurances department, while there should be more funding on the education sector since it has a significant impact on earning because of its impact on the individual’s investment which in a way is beneficial to the economy and the society as well. In-depth studies using methods such as the professional judgment method and the successful schools’ method also present a notable gap between contemporary levels of funding and those that are required to reach capacity and equity.
We want to research more of the taxations impacts on those two sectors separately, and conclude in findings that would support those sectors since their importance to the overall wellbeing of the individual, society, and the economy.
In this research proposal, we have aimed to discover the effects of taxation on the health and education sectors, those effects will be further explained in the future based on their state (positive/negative), their need for more or less funding, and to find solutions to some of the early findings in past studies that have been done on the same or a similar topic.
All while separating these two sectors individually by the impact of taxation on them, to be able to dissect the data more analytically, to determine the best suitable method of solution to the findings. So far, based on past studies there were more issues with the health sector than education. For the health sector; especially in the health insurance department; the tax preference for health insurance is likely a key cause of inefficiency in the U.S. health care system; by making health spending appear less costly than what they really are, the tax preference gives employees an incentive to take compensation as health insurance rather than cash.
Therefore, it is quite clear that governments must focus their attention on containing prices in the private health sector. One alternative is to reduce the present tax payments in the private business for both the consumers and sellers of health insurance; this act would assist to make the procurement of private health insurance more costly, and that would make the sellers’ market more competing, and would generate less extensive benefits packages to be sold. Nevertheless, the removal of tax payments eventually converts into a legislative question that has not answered with a positive reply in history.
While on the impact of taxation on education, the findings based on past researches were quite on the positive side. The positive net employment and economic impacts grow over time, same as the improved educational spending work develops the perceived quality of life in the multiple countries and as education-related productivity of the regional work-force allows workers to demand bigger incomes and makes businesses more lucrative. The overall economic profits from education spending gains stem from both the budgetary outcomes of educational spending and from the improvements in regional competitiveness.
In summary, when countries face the necessary, tough choices in regard to public spending versus taxation, they should keep in mind that both components of the balanced-budget equation have implications for jobs and income in the state, and that goes for both sectors of health and education. With the heath sector, governments must focus their attention on containing prices in the private health sector, while for the education sector they must already notice the positive impact taxation has on it, and improve it by extra funding. Policymakers should, therefore, devote careful consideration to the likely results of those specific sectors in relation to taxation.
- Greenspan, N.T. and Vogel, R.J. (1980). Taxation and Its Effect Upon Public and Private Health Insurance and Medical Demand. Health Care Financing Review, [online] 1(4), pp.39–45. Available at: https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4191128/.
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- portal.edukasyon.ph. (n.d.). Edukasyon.ph: Making the Future Less Scary. [online] Available at: https://portal.edukasyon.ph/blog/taxes-and-students-whats-the-connection [Accessed 20 Jun. 2020].
- www.doingbusiness.org. (n.d.). Why it matters in Paying Taxes – Doing Business – World Bank Group. [online] Available at: https://www.doingbusiness.org/en/data/exploretopics/paying-taxes/why-matters.
- Macek, Rudolf. “(PDF) The Impact of Taxation on Economic Growth: Case Study of OECD Countries.” ResearchGate, Jan. 2005, www.researchgate.net/publication/276088447_The_Impact_of_Taxation_on_Economic_Growth_Case_Study_of_OECD_Countries. Accessed 20 June 2020.
- Cogan, John F., et al. “THE EFFECT OF TAX PREFERENCES ON HEALTH SPENDING.” National Tax Journal, vol. 64, no. 3, 1 Sept. 2011, pp. 795–816, www.ncbi.nlm.nih.gov/pmc/articles/PMC3322613/.
- Holter, Hans A. “Accounting for Cross-Country Differences in Intergenerational Earnings Persistence: The Impact of Taxation and Public Education Expenditure.” Quantitative Economics, vol. 6, no. 2, July 2015, pp. 385–428, 10.3982/qe286. Accessed 11 Mar. 2020.
- “Tax Reform Impact on Health Care and Life Sciences.” Deloitte United States, www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/life-sciences-health-care-tax-reform.html. Accessed 20 June 2020.
- Wikipedia Contributors. “Tax.” Wikipedia, Wikimedia Foundation, 6 Apr. 2019, en.wikipedia.org/wiki/Tax.