A second step is to comprehensively reform the Commonwealth’s - TopicsExpress

A second step is to comprehensively reform the Commonwealth’s tax system, which is heavily dependent on income taxes and tends to levy high rates on narrow bases. When rates are high, it increases incentives for activities to be shielded from taxes, perhaps by moving activity to the informal sector, or perhaps by halting the activity altogether. Either way, collecting the necessary revenue requires rates to be even higher on activities that remain in the base, reinforcing the problem. Typically, comprehensive reform is necessary to break the cycle by simultaneously broadening the tax base and reducing rates across a range of taxes. Such a reform would likely produce a significant bonus in terms of faster economic growth, particularly in the formal sector. W. Dudley President NY Fed.

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