1) Tax is the amount of money demanded by government to financially support the economy. The main two types of tax are direct tax and indirect tax. Direct taxes are levied on the income, property, or wealth of an individual (e.g. Income Tax & Corporate Tax). Direct taxes tend to be progressive, efficient, and flexible. However some will also argue that it encourages tax evasion, disincentive to work, tax havens which results to leakages, and is unpopular with the electorate. On the contrary, indirect taxes are charged upon goods and services, thus affecting citizens indirectly (e.g. VAT & Council Tax). It is effective because it let the people decide whether or not to pay it. However, taxes like VAT are regressive towards citizens.
The main purpose of a government to impose tax is to raise revenue for government expenditure. Public goods are goods that are given collectively because it is both non-excludable and non-rivalrous (e.g. fresh air, national defence, street lighting and etc). In addition, merit good are goods that are needed but are under-provided or costly (e.g. Education, Health, and etc). Those goods are the government expenditure, and are financed by tax revenues. These revenues also used, using austerity measures, to pay off deficits. An example would be in 2010, when the Conservative government increased VAT using austerity measures in order to “fast-track the elimination of Britain’s budget deficit.” If there are no taxes, then government would have to increase borrowing, thus increasing the Public Sector Net Cash Requirement, a term used for budget deficit.
Governments also impose tax to control market failure. In an economy, there are negative externalities, or a consequence from a particular economic activity...
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...l benefit the poorer individuals in the economy. Again, similar to supply side policy, lower rates will result in lower costs of factors of production. This will allow firms to expand their business, invest more, and generate employment. This will result in a higher revenues and tax receipts, even when tax rates are lower. According to figures on HMRC, John Redwood pointed out that the top rate tax cut to 45% actually increased tax receipts by £9 billion pounds in 2014 (Wheeler, 2014). Another example would be 1980 USA, when the Reagan Administration decided to cut tax from 70% to 28%. The method was successful, ending the USA from experiencing stagflation. Therefore tax cuts will increase revenue instead of decreasing it.
In conclusion, cutting taxes will result into both advantages and disadvantages. Governments should consider both and thus, decide effectively.
Government spending and taxes cause overall harm to economy because it would decrease individual spending and private consumption. Raising taxes on private consumption would only help fund public consumption and pay for government spending.
In 2012 Republican Presidential candidate Mitt Romney and his Vice-President candidate Paul Ryan introduced their idea for the future of the tax system; they called it the “Trickle-Down Effect”. The definition of “Trickle-Down” is ”an economic idea which states that decreasing marginal and capital gains tax rates – especially for corporations, investors and entrepreneurs- can stimulate production in the overall economy. According to trickle-down theory proponents, this stimulus leads to economic growth and creation that benefits everyone, not just those who pay lower tax rates”(“investopedia”). Essentially, keeping the Bush Era tax breaks in place and even broadening them in certain aspects, to promote growth throughout the business sector. They believed that by lowering taxes all across the board it would give companies an incentive to hire new employees and create new jobs. This sounds like a fairly good idea, give empl...
There are several key constitutional principles, such as popular sovereignty, federalism, republicanism, individual rights, and so on. The United States is a democracy and residences are considered the source of the government powers. Since America is well known for freedom, it is obvious that the government does not have powers to control everything. Limited government is another type of the constitutional principles as well.
Its official; Americans are going to be paying less in taxes to the federal government. In a ceremony staged in the East room of the White House President Bush signed the third-largest tax cut in U.S. history into law. Will this tax cut actually help the economy? Bush says it will. He claims, "this legislation is adding fuel to an economic recovery" (Benedetto). Bush hopes the massive $350 billion tax cuts will create jobs and heal the fraught financial system. Despite his optimism, Bush has many foes pointing out the rumored flaws in tax cuts. Democrats in congress, as well as some Republicans, are in strict opposition of the bill. They claim it will only worsen the stressed economy and leave families in the low-income tax brackets behind. Frankly, both the opposition and proponents of the bill are correct. The tax cut will, in some ways, help the economy and create jobs, but it also will pad the pockets of the rich while failing to acknowledge the plight of low-income families.
Like most taxpayers, many politicians also agree that tax reform is necessary in the United States, but that is where the agreement stops between the politicians. Michael Kinsley states that “Reform is any change in the tax code that you favor” (1). Depending on each taxpayer’s personal income situation, what one person favors could be vastly different from what another favors, which is why tax reform is so complicated. Thus the problem comes with trying to figure out what is the best approach to take, how to do it, and when to do it.
In May of 1787, in the city of Philadelphia, the delegates from all of the thirteen states held a meeting in order to make a better union. The end result was the Constitution of the United States. The delegates discussed which form of government would be the best suited for both the security, and the freedom that many had wanted to add to this new government. The delegates had denied both the confederal and the unitary forms of the new government for the new form which is called Federalism. Which was to be described as the constitutional relationship between the United States and the Federal government. Federalism is different from the other two types of government, unlike the unitary form of government, which is ruled by the central government,
Taxation has always been a major controversy. Just like any major corporation, the government is constantly looking to raise revenue. The easiest and fairest way to do this is by taxing the people. However, how the people will be taxed is always an issue.
The use of taxes is one of the government's favorite ways to make its presence known in the economy. While this method seems blatantly obvious, many of the ways the government uses the money collected by taxation is not. Some of the money it takes is used to fund other programs designed to "protect" consumers and to "create" jobs. Be...
Democracy has been the root of a limited government, the system of which government powers are distributed so that one group of leaders do not have too much influence. The limited government has been structured to keep peace amongst all parties that are involved in the government. And under the U.S. Constitution, citizens are given ultimate power by their right to choose their representatives through the democratic process of voting. Each levels of the government are limited as they have their own responsibilities. The city government has the most local level of government as the residents elect a city council and mayor to represent their interest at the city level. All city governments establish housing and health regulations, and are responsible
The increased and reduced levels of taxation have a direct effect on the state of the economy. A cut or reduction in tax rates in a country reduces the amount of taxes households remit to the government. The amount of remitted taxes depends on household income. This increases their disposable income. The increase disposal income enables households to spend some of this extra income on purchasing goods and services expanding companies supply rates or spend the income on investments, thus creating the supply for job opportunities and sometimes save the remaining income. Their increased spending leads to a larger consumption in the aggregate economy facilitating the circular flow of income. Companies that produce the much-needed goods and services for the increased demand have to subsequently increase their production. An increase in production to cater for the growing demand for goods and services may result in the supply for job opportunities increasing taxes remitted to the government. All these translates in the further increase of income levels and output in the economy. When the economy of a country expands, the amount of taxes paid to the government increases accordingly thus facilitating economic growth. However, if the demand for goods and services tend to cause prices to shoot
There are many different views on how a government should be properly run. In my opinion, a legitimate government is one that creates and enforces laws that are supported by its constituents. The people should have a say in who their leaders are and in the type of laws they want enforced through a system of voting. The government is considered legitimate if it is able to protect its people from invasions, and if it can meet the needs of citizens by settling disputes. A legitimate government is one that is agreed upon by entering a social contract by continuous participants in a given society.
In our opinion government spending is better than tax cuts. Government spending increases the employment as well as the income of the people of the country, though tax cut only increases the wealth of the people who may not spend the extra money earned and help in the growth of the economy.
Therefore a free market is not desirable as maximizing their utility is priority. So government is expected to correct the market failure by choosing to char...
A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.
It is an indirect tax associated on the utilization of most goods and services. VAT is imposed by VAT-enrolled organizations that supply good and services in the course or advancement of their business. VAT is also appropriate on the import of goods. VAT is imposed at each phase in the production network and is gathered by organizations for the benefit of the government. VAT is at last brought about and paid by the end consumer.