Taxes

Taxes and Their Affects This is a paper that will inform you on what happens when the government raises and lowers the taxes. I will go over how it affects net personal income, how it affects GDP, how it affects the economy as a whole, and whether or not taxes should be raised to equalize income. When thinking about taxes there is a lot to think about for the government. For example say that the government had 100% tax this would have a negative effect on the amount of taxes the government would get, if you had to pay 100% tax you would probably not work because you would be working for no income. You would probably spend time growing a garden, finding food, and using the batter system to get the things you need to live. Now if you were to go the other way and you had to pay no tax you would think that things were pretty good being able to keep a 100% of the money you earned, but then the government would have no income to stay running. This would be bad because we would not have anyone looking over us and keeping us protected from other countries, and we would not be able to have a military to protect us because they are all paid by our taxes so they need that money to run. Government tax revenue does not necessarily increase as the tax rate increases. The government will earn more tax income at 1% rate than at 0%, but they will not earn more at 100% than they will at 10%, due to the disincentives high tax rates cause. Thus there is a peak tax rate where government revenue is highest. The relationship between income tax rates and government revenue can be graphed on something called a Laffer Curve. First I will go over how lower taxes affect the economy. It is hard to say if lowering taxes is better for the economy one of the thing that have to be looked at when bring this up is, where are the tax cuts coming from and what the revenue that those taxes were being used for is being cut. Because if you are getting taxes cuts because they cut the amount of tax revenue being used for schools that may have a positive affect on the economy now but what affect will those tax cuts on education have in the future. These are the types of things that have to be considered when trying to figure out if lowering taxes is good for the economy. Many experts do believe that there is a real benefit to lowering taxes it just has to be done in the right ways and that tax cuts the government chose to cut from have to be right also they have to choose low impact tax cuts so other things do not suffer from the tax cuts. It is safe to say the positive affect it will have on the working class people will be happier, bring home higher pay checks because there is less money being taking form their checks. These types of things have a positive affect on the economy because people make more money they spend more money, this leads to a higher demand on production then that leads to more jobs so when done right lowering taxes, but not too much has a positive effect on the economy. Most will agree this has an all around bad affect on the economy some of the major things that are affected with the rise in taxes is, inadequate incomes this is felt heavily buy the workers because it is the workers that create the wealth. Then you have lower wages because businesses having to pay more in taxes leaves less to money pay wages so wages are lowered to compensate the increase in taxes, this leads to higher prices business have to raise the price of goods and services to balance out there ledger sheets. Some other things that are affected by higher taxes is a lowering in the quality of items, shortages in products or products being discontinued, loss of jobs, foreclosures, evictions, poverty and higher crime. These are all things that can and in some cases happened in the past as a result of taxes getting to high for people and business to function properly. So in my opinion the overall effect of higher taxes is bad for the economy. This all has affects on the GDP of the country with the lowering of taxes but not too much so that the government cannot function has a positive effect on the GDP, the lowering of taxes creates jobs, increases take home pay for workers, puts more money back into the economy, creates an increase in the need for goods and services, and creates an increase in production these things together will have a positive affect on the GDP. Then you have the other direction the increase of taxes which have a negative effect on the GDP. The reason for this is business lower wages, have a decrease in production, loss of jobs, a lowering in quality, and a rise in unemployment and foreclosures. So this all together will cause a decrease in the GDP of the U.S. and at a point when we are trying to get out of debt and stimulate the economy this would have negative affects on our nation. Now for the thought should taxes be set to equalize incomes and for me that is easy to answer no!! I think it is good that there is a person out there that make these high incomes and are able to become millionaires. It is these people who are the main ones out there starting new business and creating new jobs. If we were to tax them to a point to try to equalize incomes they would not be able to save the money needed to create these new jobs. Also it is these people who invest in the stock market which gives business the money to be able to expand there companies which in return are creating more jobs. So in my opinion we need to leave them alone so they are able to do these things that help build the economy up. Taxes are necessary to make the world run smooth they are need to fund the government so states can get the funding they need to keep everything running smooth. Tax money is used to fix the infrastructure of the U.S. this is things like roads, bridges, and rest areas/information centers. Having good roads and bridges is a very important part of our lives we need good roads and bridges to be able to get to work and drive long distances with ease. Also we need a military to protect us from countries that want to see us fall at any cost. So it not as easy as saying get rid of the government and everything will be good that is not the case The government is need to keep the U.S. from going in to a state of cause. We just need to find the balance between tax and work that give everyone the ability to make a living and be able to survive. Resources Brue, S. L., & McConnell, C. R. (2010). Essentials of economics (Ashford Custom 2nd ed.). New York: McGraw-Hill/Irwin. Bureau of Labor Statistics. (2011). Producer price indexes: Grain prices and our grocery bill . Focus on Prices and Spending, 2(2). Retrieved from http://www.bls.gov/opub/focus/volume2_number2/ppi_2_2.htm DInnocenzio, A. (2011, March 29).