Lower tax rates, Macroeconomics

Assignment Help:

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.

 


Related Discussions:- Lower tax rates

Budget balanced, Given a four sector economy how do you find the budget bal...

Given a four sector economy how do you find the budget balanced

Illustrate the problem for economic performance, Illustrate the problem for...

Illustrate the problem for UK economic performance This is a foremost problem for UK economic performance and helps elucidate the persistent deficit on the current account of

Pros and cons of using monetary policy, The monetary system in any economy ...

The monetary system in any economy facilitates trade and allows people to trade more efficiently, as compared to a barter economy. In the United States, the monetary authority is t

Static and dynamic multipliertitle.., suppose c=a+by and investmentI is giv...

suppose c=a+by and investmentI is given.assuming mpc=.80 and I=50,find static and dynamic moel question #Minimum 100 words accepted#

Explain the time constant of the circuit, A coil of inductance 0.04H and re...

A coil of inductance 0.04H and resistance 10Ω is linked to a 120V, d.c. supply. Determine (a) The ?nal value of current, (b) The time constant of the circuit, (c) The va

Domestic investment, How will a fall in domestic investment affect the trad...

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world, in

Liberalisation and changing sources of fdi, Liberalisation and Changing Sou...

Liberalisation and Changing Sources of FDI: European countries  had been major sources of FDI inflows  to India until 1990. However, their relative importance declined in the

Real exchange rates, Real Exchange Rates (EXCH) is the next variable that w...

Real Exchange Rates (EXCH) is the next variable that will be analysed in this VAR. The reason for including exchange rates in the VAR is that they are an important channel through

Annual increase in replacement cost, You have acquired a CT scanner at a co...

You have acquired a CT scanner at a cost of $750,000. You expect to perform 7,000 procedures per year over the estimated 5-year life of the scanner. Assuming no salvage value and a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd