Integration, decentralization, taxation, and revenue sharing : Good governance, sustainable fiscal policy and poverty reduction as peace-keeping strategies

consumption 
oriented income tax
, which burdens annual labor and capital income; but the saving 
adjustment for pensions (downstream taxation) and the interest adjustment for profits 
and other interest payments eliminate the avalanche effects of synthetic income taxa-
tion so that the annual tax rates as well as the lifetime tax burden on capital income 
remain the same.
40
The “Easy Tax Proposal” is such consumption oriented income tax, which integrates 
personal and profit taxation (income and corporation tax). There are two forms of tax 
collection: 
personal income tax
(on persons and pass through companies or S-
36
For more details see Petersen (1981 and 1982). 
37
For more details see Petersen (2003, 2003a and 2006). 
38
See for more details Petersen (2004). 
39
See Petersen/Rose (2004). 
40
For details and a complete draft law see www.einfachsteuer.de. 

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34
companies like in the US corporation tax law) and 
profit tax
(on large corporations). 
Three sources of taxable income do exist: Income from 
wages,
income from self-
employment (
capital
) and 
retirement
income (negative: contributions, positive: pen-
sions). 
Interest adjustment
with regard to capital income (protective interest rate) is 
implemented, a modified cash-flow taxation (liquidity oriented) established and s
aving
adjustment
with regard to contributions to and pensions from old-age security sys-
tems applied. 
For private households equal treatment of lifetime income from wages and capital is 
assured and intertemporal neutrality on consumption decisions realized. For enter-
prises such a system put into practice an equal marginal burden for all enterprises, 
often decrease the marginal burden for small and medium enterprises (SME) as well 
as small corporations and also decreases the average burden for SME, which im-
proves capital formation and investment. Because the SME are the backbone of each 
economic setting this guarantees job creation and less unemployment. 
The macroeconomic impacts are: