Consumer IncomeEssay Preview: Consumer IncomeReport this essayGovernments enforce taxes on a multitude of trade and industry operations including revenue obtained from financial resources such as income, earnings, employment, and surpluses to raise money to maintain operational funding. Taxes on earnings can provide large sources of monetary benefits to the government, but can sometimes negatively impact the progress of economic growth. Income taxation often causes a reduction in societys demand for goods and services, also known as aggregate demand (Economicae, 2008).
When the demand for goods and services is low, economic growth is negatively affected because fewer workers are hired by businesses. Businesses create layoffs hoping to cut company costs which leads to economic contraction (Economicae, 2008). Disposable income plays a vital role in aggregate demand. Often, factors such as income taxes decrease aggregate demand by decreasing the final income that society brings home (Economicae, 2008). This example typically affects spending in areas like entertainment because the majority of household income is used for necessities. Minimizing taxes for middle and lower class families can very possibly create higher aggregate demand. This would allow the current use of household income to flow more abundantly into the economy and increase aggregate demand. This monetary flow would alleviate the need to conserve private funds and more money could be circulated into the economy.
The Importance of Saving $80K for the American Dream: A Real Tax
The US economy is getting ever less reliant on government spending and will remain so unless the U.S. government lowers taxes. So when an increased taxation is required to meet that tax, some of the current efforts are aimed to decrease the burden on the poor. This would include reducing the effective income tax burden and reducing deductions. Currently the U.S. income tax is only $12,000 a year, less than one% of gross domestic product (GDP) (Waltz et al., 2013). However the impact of this policy of reducing the tax burden on the poor is more subtle. It would help the poor if they are allowed to cut back on spending for school and healthcare and also could help reduce the need for government to provide additional income to pay for the poor’s basic needs. The impact of a major reduction in all state taxes in the form of a $50 (or $100) state corporate income tax would be minimal, so it is simply not the case to reduce state and federal corporate tax rates. Another positive thing about setting state rates would be the increased ability of businesses to reduce their tax base. One of the greatest negative side effects of lower income earners’ state and federal corporate taxes would be that tax breaks for business would not be possible. Although it doesn’t take much to convince the wealthy, there are economic forces that create incentives to leave states with greater taxes and thus lower the marginal tax rate or the rate for state and third tier income taxes. For example, when states reduce local ordinances for child care fees, school day and parental leave, local governments would be able to increase the local rate for those services. This would increase local revenues and thus create demand and reduce the economic impact of their laws. Lowering these local costs would lower labor costs and so make them more attractive for businesses to use.
Economic Effects on the Poor: A Low Dividend System
A wealthy tax system would create more efficient private and public investment projects. Thus lower tax rates would lead to more investment as well as lower tax burden on the working poor. On a per capita basis, it would therefore create a 20% tax on capital expenditures and a 20% tax on the value of investments and businesses. On top of this, it reduces tax expenditures and thus makes it even more economically viable to own an investment asset such as an apartment building or car. This higher tax would also provide capital resources which are able to provide the necessary income to generate dividends to cover the difference in taxable income. Therefore, the state’s ability to pay for such investments and profits would be reduced.
As discussed above, a lower state and federal income tax means a more efficient and sustainable government. Higher income earners pay a higher tax rate on money from their pockets and a lower effective income tax means higher taxes. Therefore, if a society has lower income then all taxes are lower. However, an increase in income or net income are also necessary to meet costs as well as eliminate state and third tier corporate tax rates. Another negative effect of this increases the ability of firms to reduce cost, which in turn reduces the burden of regulation. As mentioned earlier, even though a large percentage of corporations maintain an income tax rate higher than 50%, the net operating loss of the corporation would be significant. This means that if a company has a profit rate larger than 50%, it would have to pay a much too high tax rate. A lower effective income tax would then hurt those who are most likely to save for retirement. This would result in lower net operating loss and also lower tax rates.
So is America’s taxes on money the end result of poor economic policies? No, not unless they cause the cost