Secondly high taxes create disincentives to work and this can be analysed through income and substitution effects. The substitute for work is leisure time and when taxes increase the opportunity cost for leisure time decreases, also people will have to work longer hours to earn the same post tax income causing disincentives as it reduces living standards as people must work longer and harder for the same incomes. This will create disincentives to work and so lead to a reduction in the labour force meaning less people in jobs and so less people paying income tax. Also as people earn less this way consumption in the economy falls therefore reducing the governments VAT recipts and corporate tax revenues and businesses make lower profits. This will lead to increases in the fiscal deficits as the government earns less and may be spending more in forms of social protection i.e.
Everyone would be taxed on what the consumer would buy. On the other hand the current income tax system taxes people based on how much money they make. The more they make the more they are taxed and vice versa. The fair tax, which is a comprehensive proposal, is a much better system than the income tax because it involves a flat rate which is transparent and simplistic. Since the fair tax would enact a flat tax that everyone pays equally, this would allow the taxing to be fair and transparent.
When the country has a surplus, the more the country retains of its total output, the more tax payers retain of their income. When the country has a budget deficit it devalues the GDP, as money earned from what the country produces will be lost in paying back the deficit. If a country has a GDP of $1 trillion and a budget deficit of $200 billion, the country only gains $800 billion on its GDP. Debt is similar to a deficit except debt builds up over the years and grows with each yearly deficit. The problem with debt is there is an interest payment that must be paid.
There are some red flags in Crazy Eddie’s financial statements that indicate a higher-thannormal level of audit risk and we list them as follows: cash dropped from 34 percent in 1985 to 3.2 percent in 1987. Short-term investments increased from zero in 1984 and 1985 to 41.4 percent in 1987. Merchandise inventories decreased from 63.8 percent in 1984 to 37 percent in 1987. Accounts payable decreased from 55 percent in 1984 to 17 percent in 1987. Shortterm debt increased from 0.3 percent in 1984 to 16.8 percent in 1987.
It paints a bad picture because the business may collect zero revenues for a month and pay accounts payable during that month showing a loss of revenue while the next month they may pay zero accounts payable but receive two month’s worth of accounts payable, this would indicate that the company had higher than realistic earnings. Accrual basis accounting paints a better picture of how a company profits or losses over a indicated time period, but fails to state clearly the cash on hand. E3-2B (b) Why would politicians prefer the cash basis over the accrual basis? The Government prefers to use the cash basis over the accrual basis for many reasons but none more the how to account for public unions workers’ pensions. The Government does not want to report their pensions while the employee is working because politicians believe that benefits
Both buyers and sellers are worse off when goods are taxed (Mankiw, 2008). Corporate Level Taxes Corporate level taxes are explicitly designed to reduce the firm’s input prices which consequently reduces the output prices, this is of utmost importance in discount retailing industry where the strategy is based on price, in fact Jennigs, Weaver and Mayew (2012) points out that consumers are the primary beneficiaries of lower corporate tax rate and the reverse will be true, an increase in corporate tax rate limits industry participants ability expand and seize economic opportunities. Personal Taxes Taxes levied on individuals and household reduces disposable income which threatens the level of consumer spending within the industry,
First, payments on debt interest are tax deductible but payments on equity are not. Second, equity allows shareholders to share the company profits. With that, equity holders now also hold stake in AMSC and share control. Comparatively, debt financiers have little or no impact on control of the company; assuming payments are being made. Profits are also used to pay the debt, however, so how this weighs out as a disadvantage would clearly depends on how well or not
How about making great increases on taxes for the rich? Wouldn’t that reduce the income from their industries and businesses as well as making it hard for them to maintain all their employees? It’s interesting how the big earners are portrayed as being extravagant, spending on luxurious goods while the middle class who have foreclosures and bankruptcy are only portrayed as caring about their children to go to good schools. Oh! How
Social security is extremely important for the well being of elders, injured workers, and the handicapped. If this program were able to be privatized in the stock market, the economy would be another variable to add to the many social security has. By investing social security in the stock market, the downfall of the market could lower peoples living conditions considerably, and erase what has have been paid for possibly decades. One argument used is that social security does not do enough for people to live on. About one in five people use social security as the only source of income, and more than half use social security for more then half of the annual income (Anspach).
The 10th amendment in the U.S. Constitution states what the Constitution does not give to the federal government and does nor prohibit from the states is reserved for the states or the people. These reserved powers range from licensing, holding elections, and any state laws that the state itself finds fit to impose. An example of a state law would be the legal limit of alcohol in someone system. Reserved powers let each state retain its freedom and independence from the US government (Ramsey, 2012) The first eight amendments of the Constitution prohibit the federal government from denying people their rights. To ensure the federal officials would not later take those rights the ninth amendment was written.