This is a Cess

1. Reducing economic distress & preventing farmers suicide by

tackling draught:
There is an urgent need of top-down approach to provide Maharashtra state
real-time
drought monitoring and seasonal forecasting, and a bottom-up
approach that builds upon
existing regional and local systems to provide
Maharashtra state coverage.
Some of the major government programs help mitigate the adverse impacts
of drought and
build resilience of people by encouraging efficient water
management practices, ensuring
livelihoods, ensuring economic access to
food and supplying fodder among other
measures.
Scheme must aim to provide minimum job guarantee for 100 days in a year
to the adult family members of r u r a l households below poverty line. The days for
wage employment can be increased in drought years to help stabilize incomes.
Crop insurances based on the crop loss of the area.
2. Real estate prices have gone up to such a level that people are finding it hard
to buy a home as it is. In such circumstances it is unrealistic for the average
people to think of owning farms for cultivation. Majority of the people who
have their own land to till, have got it from their ancestors. Since more often
than not, after the death of a farmer his land is divided among his sons, it
leaves precious little for a farmer. This is the reason that the scale of
operations here is so small. At the most, it is just a couple of acres. This in
turn leads to small income that does not permit processes like mechanization
and automation that are needed to stay relevant. This is why the small
cultivators have no option but to rely on human labour, which in this day and
age is woefully inadequate. At times, thanks to the increasing real estate
prices, small farmers that are not doing so well are encouraged to sell their
land to realtors and ensure a good life for themselves. This also means that
the amount of land available for farming is decreasing thus affecting Indian
agriculture in general.
Farmers need to be educated about various facets of farming like below:
Centres of excellence need to be set up to help them.
Agricultural universities need to discover new science-based practices and
technologies.
Insurance is needed for the draught hit areas.
They need to be given better access to credit and at better terms and
conditions.
Landholdings should be consolidated.
Organic manure should be used.
Mechanization is needed.
Markets should be regulated.
Direct provision of capital to farmers by government.
Encouraging integrated, contract, and cooperative farming.
Developing water sheds.
3. Making institutional finance available to every farmer is another important
solution to save to the farmers from debt traps of money lenders. Where

institutional finance is available, it should be made easily accessible to the

poorest farmers. This calls for removing of elaborate formalities and
procedures for obtaining the loans. A poor farmer would be unable to
understand the complexities of procedures; he needs a simple solution for his
financial needs. Effective monitoring of the disbursed funds is also required
because in many cases, the poor farmer is used as a front-end while in fact
the benefit of the loan is availed by a bigger land owner. In addition,
monitoring is also needed to ensure that the farmers are using the funds for
the right purposes.
4. Farmers need to be advised and guided on economical methods of cultivation
which would save finances for them. The technological advancement in
agriculture should be passed down to the small farmers. Where the existing
crops would not do well under current drought and weather conditions, the
farmers could be helped to shift to the cultivation of crops that would be easy
and economical to cultivate in adverse conditions. Agriculture should be
approached professionally and not as a traditional occupation.
5. The government could also explore the possibility of pooling of the lands of
small farmers and making a bigger chunk of economically cultivable land.
Through pooling of lands, the small farmers can avail the economies of
cultivating on a larger scale.
6. Small farmers should be encouraged to develop alternative sources of
income and the government should take up the responsibility of providing
training to the farmers to acquire new skills. In drought affected areas, the
Government could start alternative employment generation programs to
reduce the dependency on agriculture as the sole source of income.
7. Provision of relief facilities alone is not sufficient as it has been observed in
the case of Andhra Pradesh where farmers committed suicides just to avail
the benefits of relief packages. Relief packages should be given as a benefit
to farmers to enable them to sustain their livelihood rather than as a relief to
families of farmers who commit suicide.
8. As has been mentioned earlier, there cannot be one single and most effective
solution to prevent the suicides of farmers. The trend can be reversed
through active participation of the Government in addressing the real issues
of the farmers that are driving them to suicides. Social responsibility also
goes a long way to help the farmers. The big land owners in most places do
not lend a helping hand to struggling farmers, in most cases; they grab the
benefits which are otherwise meant for the poor farmers. General public,
NGOs, Corporates and other organizations too can play a part in helping
farmers by adopting drought affected villages and families and helping them
to rehabilitate.

There is a reasonable opportunity to raise revenue since our tax-to-GDP ratio

is about 16%. Many citizens dont pay appropriate taxes. While measures like
goods and services tax (GST) and Direct Taxes Code are important from the
long-term point of view, following quick remedies can improve tax collection
significantly without introduction of new taxes.
1. Cap on tax-free long-term capital gains: Long-term capital gains
on listed securities were exempt from income-tax to increase
participation by retail investors in capital markets. But ultra-high net
worth individuals (HNIs) have benefited from tax-free capital gains
more than retail investors. A real estate industry can start investing in
illiquid securities for converting unaccounted income into legal income
through tax-free capital gains. A reasonable cap on exemption for
capital gains will protect retail investors interest and at the same time
increase tax collection. Tax deduction on housing loan interest can be
increased from the current Rs.1.5 lakh as the multiplier effect of
increase in housing activity can uplift growth by a good margin.
2. Link transactions to filed taxes: The income-tax department
collects information on various types of transactions such as buying
and selling of securities, cash deposits and so on. Significant tax
collection can happen if this information is used to detect undisclosed
income. A sustained campaign to highlight the ability of tax
department to detect undisclosed income will improve tax compliance.
3. Monitoring jewellery stores: Most jewellery stores have a 24x7
surveillance system and cash counting machines at jewellery stores
suggest large usage of cash in purchasing jewellery. In-house
recordings of jewellery stores can be used to find people who bought
gold without paying taxes for the same. As a bonus, this will also help
reduce demand for gold.
4. Curtailing unaccounted money: Real estate provides a major
avenue for deployment of cash/parallel economy proceeds.
Reintroduce presumptive purchase of properties that are undervalued.
This provision, in its short period of usage, was able to reduce the
extent of black money in the real estate sector. Incentivize the
government machinery to acquire as well as dispose of property in a
profitable manner so that past errors of buying overvalued properties
can be avoided. Create a special task force to track economic activities
that are predominantly settled in cash. Trading hubs, party contractors,
big-ticket purchases and cash couriers are all worth tracking for
bringing the parallel economy under the tax net and increasing tax
collection.

5. Increase service tax: Services contribute more than two-thirds of the

GDP but service tax contributes less than 20% of tax revenue. Service
tax increases compliance as it is levied at the consumption stage.
While service tax net has been widened, there may be more
opportunities, especially in the unorganized sector. A nominal tax on a
presumptive basis may incentivize the unorganised sector to come
under the service tax net.
6. Need for effective dispute settlement mechanism: Tax arrears of
Rs.1.45 trillion for FY11 suggest the need for launching an effective
dispute settlement mechanism. A consent system can save
considerable time and effort and convert arrears to actual tax
collection. Resources saved on pursuing legal cases can be directed
towards finding out undisclosed income from the information collected
on various transactions.
7. The Maharashtra government is asset rich and cash flow poor. Sizeable
amount of revenue can be generated by auctioning various
entitlements, which are provided technically free to citizens but the
cost is paid by consumer in some form. Postal stamps, road names,
celebration in important places, auto number plates, parking slots, fast
track channel for preferential access in queues from immigration and
security check at airport to temple lines and so on. Obviously, the
government can exercise its veto power to maintain the decorum and
quality of such services.
8. Plinth area based Property Tax may be operationalized without a gap
on increase or limit on decrease.

9. A Cess to be levied for conversion of land from paddy field, marshy

land, pond or water body into garden or building site. This one-time
cess is to be collected at the rate of 5% of the capital value of the land
for conversion of paddy fields and 2.5 % for other kinds of conversion.
10.
Presumptive Profession Tax may be introduced to bring certain
self-employed occupational groups into the tax limit.
11.

Entertainment Tax may be introduced for Cable TV.

12.
Service Tax may be made compulsory and be linked to the cost
of performing obligatory functions and calculated as a percentage of
Property Tax.
13.

Ceiling on surcharges may be removed.

14.

Only the minimum may be fixed for non-tax revenue sources.

15.
A legislative provision may be introduced for indexing non-tax
revenue items and taxes like Property Tax, Advertisement Tax and
Service Tax linked to Consumer Price Index for non-manual workers for
urban areas and Consumer Price Index for agricultural labourers for
Village Panchayats.
16.
Finance ministry to develop a cell to prepare annual
maintenance plans. A Cell under the general control of Finance may be
set up for monitoring financial matters.
17.
10% of the Development Grant may be set apart for an
incentive system.
18.
For grants-in-aid a bill system may be introduced for drawing
from the Treasuries instead of the cheque system.
19.

Reform current income tax rates, create additional brackets for top
earners, and tax capital gains as ordinary income.

20. Tax carried interest as ordinary income This would close a loophole that almost
exclusively benefits the very wealthy and that lowers the effective tax rates of millionaires
and billionaires below those of middle-class households.
21. Eliminate the loophole allowing the wealthy to avoid paying taxes on inherited
stocks and bonds closing this loophole would raise substantial sums of revenue and pave
the way for capital gains to be taxed at a higher, revenue-maximizing rate.
22. Enact a carbon tax
Pricing carbon through either a carbon tax or the auctioning of pollution permits would lead
to the reduction of greenhouse gasesthe continued accumulation of which will likely result
in costly and dangerous changes in regional climatesand yield significant revenue. The
idea behind pricing carbon is that higher prices create incentives to reduce greenhouse gases.
A carbon tax policy would thus ideally hold low- and middle-income households harmless by
rebating to them a portion of the revenue raised. This revenue would also provide a readymade source of financing for public investment projects aimed at reducing greenhouse gas
emissions, projects that would create jobs in the short run and lead to large economic welfare
gains in the long term if they materially slowed the pace of climate change.

Cap the marginal tax rate on itemized deductions Limiting the rate at which
itemized deductions reduce filers tax liability would raise revenue, increase fairness and
progressivity in the tax code, help mitigate income inequality, and improve efficiency.

Enact a progressive estate tax ($160 billion). The estate tax, which targets large
transfers of wealth bequeathed to heirs, is the most progressive element of the federal tax code.
This reform would instate a more-progressive rate structure closer to what existed prior to the
Bush-era tax cuts.

Enact a financial transactions tax ($830 billion). A small levy on Wall Street trading
of financial instruments would raise significant revenue and dampen high-speed trading, while
also encouraging more-productive investment.

Enact a carbon tax ($943 billion). Pricing carbon through either a carbon tax or the
auctioning of pollution permits would lead to the reduction of greenhouse gases and yield
significant revenue.

Together, these policies could result in over $5.1 trillion in revenues over 10 years (excluding
interaction effects among the eight policies). It is crucial to note that solving the jobs crisis should
take priority over deficit reduction in the near term. However, pairing these revenue options with

temporary increases in spending could simultaneously support near-term recovery and lock in
longer-term deficit reduction.

Individual income tax policies

Policy: Reform current income tax rates, create additional brackets for top earners,
and tax capital gains as ordinary income
Policy: Tax carried interest as ordinary income
The current taxation of capital gains includes an additional loopholealmost exclusively benefiting
the very wealthythat allows the compensation of some financial-fund managers to be taxed at the
preferential capital gains rate, as opposed to the higher ordinary income tax rate. Some business
partnersprimarily hedge fund managers, investment advisers, and venture capitalistsreceive a
stake in future business profits as a form of compensation, referred to as carried interest. This form
of compensation does not include any downside risk, however; if profits should happen to
disappoint, those on the receiving end do not lose out, making the carried interest loophole operate
more like a salary than like an investment. The provision is thus an egregious loophole.
Because carried interest is currently taxed at the lower capital gains rate (and not at ordinary income
tax rates), the loophole contributes to widening income inequality as top filers are growing their
share of before-tax income earned from capital gains and dividends, while the share from wages and
salaries is declining (Thiess 2012). Warren Buffett has pointed to this loophole as one that lowers the
effective tax rates of millionaires and billionaires below those of middle-class households (Buffett
2011). Taxing carried interest as ordinary income would increase tax fairness and raise $21 billion
over 10 years (CTJ 2012).
Policy: Eliminate the loophole allowing the wealthy to avoid paying tax on inherited
stocks and bonds
Policy: Cap the marginal tax rate on itemized deductions
Some individual taxpayers elect to itemize their deductions as opposed to claiming the standard
deduction. Itemized deductions include home mortgage interest, state and local property taxes and
income taxes, some medical and dental expenses, charitable contributions, casualty and theft losses,
some job-related expenses, and other miscellaneous expenses. This tax expenditureclaimed on
around one-third of total returns in 2010is skewed toward higher-income households, with the
percentage of taxpayers claiming deductions rising along with income (Huang, Marr, and Friedman
2012). Itemized deductions are subsidized at a higher rate for high-income households than for
middle-income families.
Limiting the rate at which this tax expenditure reduces the tax liability for filers would raise revenue,
increase fairness and progressivity in the tax code, help mitigate income inequality, and improve
efficiency. In fact, from an efficiency perspective, this policy is comparable to a marginal tax rate
reduction in terms of the behavioral response it would elicit. Capping this rate at 28 percent would
help close the gap between the value of tax expenditures that differs along the income scale. In each
of his budget requests, President Obama has included a version of this policy (the most recent of
which would raise $529 billion over 10 years, according to Office of Management and Budget
estimates). Furthermore, Citizens for Tax Justice estimates that capping the value of itemized
deductions at 28 percent would raise $513 billion over 10 years (CTJ 2013).

Corporate tax policies

Policy: Pursue international corporate income tax reform, including repealing
deferral of foreign profits

Excise taxes and other tax policies

Policy: Enact a progressive estate tax: Enact a financial transactions tax such as
cigarettes, alcohol, and gasoline to reflect negative social externalities caused by these goods, as
taxing that which is harmful is preferable to taxing that which is productive, such as work or savings.
A financial transactions tax is a type of corrective tax that calls for a small levy on Wall Street trading
of financial instruments (stocks, bonds, derivatives, futures, options, and credit default swaps). Such

Conclusion
Beyond these policy recommendations there remains substantial scope for raising revenue to ease
budgetary pressures and finance job creation policies. The challenges of stabilizing the long-term
fiscal outlook, returning to a full-employment economy, and strengthening the middle class
necessitate raising more revenue fairly and efficiently. If current revenue levels are locked, we will
continue to inadequately fund national prioritiesand our long-term fiscal future will become
increasingly unsustainable.

1. Pursue international corporate income tax reform, including repealing

deferral of foreign profits.
2. Eliminate the loophole allowing the wealthy to avoid paying tax on inherited
stocks and bonds.
3. Cap the marginal tax rate on itemized deductions. Some individual taxpayers
elect to itemize their deductions as opposed to claiming the standard
deduction. Itemized deductions include home mortgage interest, state and
local property taxes and income taxes, some medical and dental expenses,
charitable contributions, casualty and theft losses, some job-related
expenses, and other miscellaneous expenses. This tax expenditure claimed
on around one-third of total returns and is skewed toward higher-income
households, with the percentage of taxpayers claiming deductions rising
along with income. Itemized deductions are subsidized at a higher rate for
high-income households than for middle-income families.
4. Limiting the rate at which this tax expenditure reduces the tax liability for
filers would raise revenue, increase fairness and progressivity in the tax code,
help mitigate income inequality, and improve efficiency. In fact, from an
efficiency perspective, this policy is comparable to a marginal tax rate
reduction in terms of the behavioral response it would elicit. Capping this rate
at 28 percent would help close the gap between the values of tax
expenditures that differs along the income scale.

5. Reform current income tax rates, create additional brackets for top earners,
and tax capital gains as ordinary income.
6. Tax carried interest as ordinary income. The current taxation of capital gains
includes an additional loopholealmost exclusively benefiting the very
wealthythat allows the compensation of some financial-fund managers to
be taxed at the preferential capital gains rate, as opposed to the higher
ordinary income tax rate. Some business partnersprimarily hedge fund
managers, investment advisers, and venture capitalistsreceive a stake in
future business profits as a form of compensation, referred to as carried
interest. This form of compensation does not include any downside risk,
however; if profits should happen to disappoint, those on the receiving end
do not lose out, making the carried interest loophole operate more like a
salary than like an investment. The provision is thus an egregious loophole.
Because carried interest is currently taxed at the lower capital gains rate (and not
at ordinary income tax rates), the loophole contributes to widening income
inequality as top filers are growing their share of before-tax income earned from
capital gains and dividends, while the share from wages and salaries is declining
(Thiess 2012). Warren Buffett has pointed to this loophole as one that lowers the
effective tax rates of millionaires and billionaires below those of middle-class
households (Buffett 2011). Taxing carried interest as ordinary income would
increase tax fairness and raise $21 billion over 10 years (CTJ 2012).
7.