Lower tax rates, Macroeconomics

Is it true that government revenues are increased because of lower tax rates?

Ans) It is true to a point. The Laffer curve determines that revenues enhance as the tax rates rise (0 tax rate = 0 revenue) up to a point, but the enhance slows as the rate rises higher and at some point total revenue starts to decline. If your incremental tax rate is 1% and you can work 4 hours to make $100, you will get to keep $99 and most people would be willing to do this. You would probably will to work the additional hours if you were taxed 5 or 10%. Though, if you were subject to an incremental rate of 99%, you would not work that long knowing the government was only going to let you stay $1. The "magic number" seems to be somewhere around 15-20%. If the rates are above this, people are not motivated to enhance their earnings. Big corporations react the similar way.

 

Posted Date: 4/1/2013 5:28:02 AM | Location : United States







Related Discussions:- Lower tax rates, Assignment Help, Ask Question on Lower tax rates, Get Answer, Expert's Help, Lower tax rates Discussions

Write discussion on Lower tax rates
Your posts are moderated
Related Questions
Q1. The poorest countries in the world have a per capita income of about $600 today. We can reasonably assume that it is nearly impossible to live on an income below half this leve

Determine the example of Currency inside banks is not money An example may also illustrate this important fact: Eric has 100 euro - this amount is obviously part of the

There is only one least-cost way to make wooden boxes for shipping tomatoes, and any firm that makes them has a cost function given by 2 TC q q = + + 200 .005 .The inverse market d

example on the calculation of IS LM Curve?

Relationship between the interest rate and the bond price Note that the higher the issue price, the lower the interest rate. Similarly when the price of a government bond incr

impact of change in government expenditure and tax on fiscal policy

1. Suppose that the supply curve for school-teachers is LS = 20,000 + 350W, and the demand curve for schoolteachers is LD = 100,000 - 150W, where L = the number of teachers and W =

Construct loanable funds market in the context of an open economy assuming that the home country is a small open economy. Discuss the effect of an enhance in the govt. expendi

Q. Explain function of AS-AD model? The function of AS-AD model is to extend IS-LM model so that we can analyze situations where Y > Y OPT . To achieve this, we should make P e