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As explained above if consumers cut back, the suppliers will reduce production while laying off workers, and then consumers will have even less money to spend in which case the cycle will repeat and thus begins a recession/depression like sequence.
Consumers lose the most from this in the long term as explained, purchasing power will continue to drop and some workers will eventually lose their jobs which can send more shockwaves through the economy.
Example: In the housing bust, consumers lost their jobs in the recession and were not able to pay for mortgages, thus defaulting. Banks then reduced their lending and consumers continued to reduce spending. Due to this suppliers had to cut their supply and more workers had to be made redundant. This cycle continued and spread throughout not only the United States but the world as banks defaulted on their debt.
3) If the government is attempting to increase government revenue an alternative is to decrease the tax rate to a maximized level where businesses and consumers would want to spend more and thus cause more revenue in the long term and the government would be receiving more revenue than at the previous tax rate.
4) A tax rate increase definitely affects the GDP and GNP due to the loss in production the aforementioned cycles would create. In the short run the tax increase doesn’t affect the GDP and GNP but in the long term Consumers would spend less and thus suppliers would produce less and lay off workers, and consumers would spend even less creating a vicious cycle that causes a
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(“A increase in income tax Essay Example | Topics and Well Written Essays - 250 words”, n.d.)
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(A Increase in Income Tax Essay Example | Topics and Well Written Essays - 250 Words)
“A Increase in Income Tax Essay Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/macro-microeconomics/1578574-a-increase-in-income-tax.
The current paper aims to evaluate and present corporate tax system, double taxation of corporate profits, progressive system of taxation and provisions on tax expenditures. The paper will make recommendations in an effort to continually develop and improve the tax system of the United States of America.
The report will cover the following: the scope & core rules of income tax and corporation tax; direct taxes v indirect taxes; revenue generated by direct & indirect taxes; tax revenues & UK government expenditure; progressivity of income tax & corporation tax in the UK; responsibility of notification of income and payment of tax.
Other than this explanation, there is no concrete definition provided for ordinary income. In order to define income as ordinary in the Australian legal system, help is often taken from Scott v Commissioner of Taxation2. According to the judgement handed down by Sir Fredrick Jordan in the subject case, receipts that must be treated as ordinary income must follow “ordinary concepts and usages of mankind”.
For instance, an assessee has to pay 10% tax when his income is ?100,000, and he is required to pay 30% tax if his income is ?300,000. Majority of the countries around the world follows the progressive taxation as they conceive the same as more fair. Under progressive taxation, the difference between the distribution of income before the taxation and the distribution of income after the taxation is of great importance.
Taxes have a great influence on consumer behavior. The objectives of taxation are to raise revenue for Government expenditure and boost the economic development of the country. The taxation authorities look into the methods of taxation every now and then so that sufficient revenue is raised without imposing unreasonable burden on the taxpayers.
The location, infrastructure and no income tax policy practiced by the government make it an ideal business hub and the biggest re-export center in the world. "There is no tax on personal income, while corporate taxation applies only to foreign oil firms and banks, and municipal tax is imposed on house rentals."7
According to Elliot, an economist working with the Conservative Way Forward, this prompted the American government to institute tax cuts so as to reduce the tax burden that citizens and foreign investors had to bear as a way of encouraging investment (Elliott, Sinclair &
Tax rates are bound to increase as taxable income also increases. In the UK rates of income tax individuals pay depend on how much of their taxable income is above their personal allowances within the tax year. The current tax year is from 6 April 2014 to 5 April