How Income Taxes Affect Economic Growth

One of the most commonly discussed issues in economics is how tax rates relate to economic growth. Advocates of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity. Others claim that if we reduce taxes, almost all of the benefits will go to the rich, as those are the ones who pay the most taxes. What does economic theory suggest about the relationship between economic growth and taxation? Income Taxes and Extreme Cases In studying economic policies, it is always useful to study extreme cases. Extreme cases are situations such as What if we had a 100% income tax rate?, or What if we raised the minimum wage to $50.00 an hour?. While wholly unrealistic, they do give very stark examples of what direction key economic variables will move when we change a government policy. First, suppose that we lived in a society without taxation. Well worry about how the government finances its programs later on, but for now, well assume that they have enough money to finance all the programs we have today. If there are no taxes, then the government does not earn any income from taxation and citizens do not spend any time worrying about how to evade taxes. If someone has a wage of $10.00 an hour, then they get to keep that $10.00. If such a society were possible, we can see that people would be quite productive as any income they earn, they keep. Now consider the opposing case. Taxes are now set to be 100% of income. Any cent you earn goes to the government. It may seem that the government would earn a lot of money this way, but thats not likely to happen. If you dont get to keep anything out of what you earn, why would you go to work? Most people would rather spend their time doing something they enjoy. Simply, put, you wouldnt spend any time working for a company if you didnt get anything out of it. Society as a whole wouldnt be very productive if everybody spent a large portion of their time trying to evade taxes. The government would earn very little income from taxation, as very few people would go to work if they did not earn an income from it. While these are extreme cases, they do illustrate the effect of taxes and they are useful guides of what happens at other tax rates. A 99% tax rate is awfully like a 100% tax rate, and if you ignore collection costs, having a 2% tax rate is not much different from having no taxes at all. Go back to the person earning $10.00 an hour. Do you think hell spend more time at work or less if his take-home pay is $8.00 rather than $2.00? Its a pretty safe bet that at $2.00 hes going to spend less time at work and much more time trying to earn a living away from the prying eyes of the government. Taxes and Other Ways of Financing Government In the case where the government can finance spending outside of taxation, we see the following: Productivity declines as the tax rate increases, as people choose to work less. The higher the tax rate, the more time people spend evading taxes and the less time they spend on the more productive activity. So the lower the tax rate, the higher the value of all the goods and services produced.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. Of course, government programs are not self-financing. Well examine the effect of government spending in the next section. Even an ardent supporter of unrestricted capitalism realizes that there are necessary functions for the government to perform.  The Capitalism Site  lists three necessary things a government must provide: An Army: To protect against foreign invaders.A Police Force: To protect against domestic criminals.A Court System: To settle honest disputes that arise, and to punish criminals according to objectively predefined laws. Government Spending and the Economy Without the last two functions of government, it is easy to see that there would be little economic activity. Without a police force, it would be difficult to protect anything that youve earned. If people could just come by and take anything you owned, wed see three things happen: People would spend a lot more time trying to steal what they need and a lot less time trying to produce what they need, as stealing something is often easier than producing it yourself. This leads to a reduction in economic growth.People who have produced valuable goods would spend more time and money trying to protect what theyve earned. This is not a productive activity; society would be much better off if citizens would spend more time producing  productive goods.There would likely be a lot more murders, so the society would lose a lot of productive people prematurely. This cost and the costs people incur in trying to prevent their own murder greatly diminish economic activity. A police force which protects the basic human rights of citizens is absolutely necessary to ensure economic growth. A court system also promotes economic growth. A large portion of economic activity depends on the use of contracts. When you start a new job, normally you have a contract specifying what your rights and responsibilities are and how much you will be compensated for your labor. If theres no way to enforce a contract like that, then there is no way to ensure that you will end up getting compensated for your labor. Without that guarantee, many would decide it is not worth the risk to work for someone else. Most contracts involve an element of do X now, and get paid Y later or get paid Y now, do X later. If these contracts are not enforceable, the party who is obligated to do something in the future might decide then that he doesnt feel like it. Since both parties know this, they would decide not to enter into such an agreement and the economy as a whole would suffer. Having a working court system, military, and police force provides a large economic benefit to a society. However it is expensive for a government to provide such services, so theyll have to collect money from the citizens of the country to finance such programs. The financing for those systems comes through taxation. So we see that a society with some taxation that provides these services will have a much higher level of economic growth than a society with no taxation but no police force or the court system. So an increase in taxes  can  lead to larger economic growth if it is used to pay for one of these services. I use the term  can  because it is not necessarily the case that expanding the police force or hiring more judges will lead to greater economic activity. An area which already has many police officers and little crime will gain almost no benefit from hiring another officer. Society would be better off not hiring her and instead of lowering taxes. If your armed for ces are already large enough to deter any potential invaders, then any additional military spending drags down economic growth. Spending money on these three areas is  not necessarily  productive, but having at least a minimal amount of all three will lead to an economy with higher economic growth than none at all. In most Western democracies the majority of government spending goes towards social programs. While there are literally thousands of government-funded social programs the two largest are generally health care and education. These two do not fall into the category of infrastructure. While it is true that schools and hospitals must be built, it is possible for the private sector to profitably do so. Schools and healthcare facilities have been built by non-government groups all over the world, even in countries that already have extensive government programs in this area. Since it is possible to cheaply collect funds from those who use the facility and to ensure those who do use the facilities cannot easily evade paying for those services, these do not fall into the category of infrastructure. Can these programs still provide a net economic benefit? Being in good health will improve your productivity. A healthy workforce is a productive workforce, so spending on health care is a boon to the economy. However, there is no reason the private sector cannot adequately provide health care or why people will not invest in their own health. Its tough to earn an income when youre too sick to go to work, so individuals will be willing to pay for health insurance that will help them get better if they are ill. Since people would be willing to buy health coverage and the private sector can provide it, there is no market failure here. To purchase such health insurance you must be able to afford it. We could get into a situation where society would be better off if the poor got proper medical treatment, but they do not because they cannot afford it. Then there would be a benefit to giving  health care  coverage to the poor. But we can get the same benefit by simply giving the poor cash and letting them spend it on whatever they want, including health care. However, it could be that people, even when they have enough money, will buy an inadequate amount of health care. Many conservatives argue that this is the basis of many social programs; government officials do not believe that citizens buy enough of the right things, so government programs are necessary to ensure people get what they need but wont buy.   The same situation occurs with educational expenditures. People with more education tend to be on average more productive than people with less education. Society is better off by having a highly educated population. Since people with higher productivity tend to get paid more, if parents care about the future welfare of their children, they will have an incentive to seek an education for their children. There are no technical reasons why private sector companies cannot provide educational services, so those who can afford it will get an adequate amount of education. As before, there will be low-income families who cannot afford a proper education although they (and society as a whole) are better off by having well-educated children. It would seem that having programs which focus their energies on poorer families will have a greater economic benefit than those which are universal in nature. There seems to be a benefit to the economy (and society) by providing an education to a family with limited opportunities. There is little point in providing an education or health insurance to a wealthy family, as they will likely buy as much as they need. On the whole, if you believe that those who can afford it will buy an efficient amount of health care and education,  social programs  tend to be a deterrent to economic growth. Programs which focus on agents who are unable to afford these items have a greater benefit to the economy than those that are universal in nature. We saw in the previous section that higher taxes can lead to higher economic growth  if  those taxes are efficiently spent on three areas which protect the rights of citizens. A military and a police force ensure that people do not have to spend a great deal of time and money on personal security, allowing them to engage in more productive activities. A court system allows individuals and organizations to enter into contracts with one another which create opportunities for growth through collaboration motivated by rational  self-interest. Roads and Highways Cannot  Be Paid by Individuals There are other government programs, which bring a net benefit to the economy when fully paid for by taxes. There are certain goods that society finds desirable but individuals or corporations cannot supply. Consider the problem of roads and highways. Having an extensive system of roads on which people and goods can freely travel greatly adds to the prosperity of a nation. If a private citizen wanted to build a road for profit, they would run into two major difficulties: The cost of collection.  If the road was a useful one, people would gladly pay for its benefits. In order to collect fees for the use of the road, a toll would have to be set up at every exit and entry to the road; many  interstate highways  work this way. However, for most local roads the amount of money obtained through these tolls would be dwarfed by the extreme costs of setting up these tolls. Because of the collection problem, a lot of useful infrastructures would not be built, although there is a net benefit to its existence.Monitoring who uses the road.  Suppose you were able to set up a system of tolls at all the entrances and exits. It may still be possible for people to enter or leave the road at points other than the official exit and entrance. If people can evade paying the toll, they will. Governments provide a solution to this problem by constructing the roads and recouping the expenses through taxes such as the income tax and the gasoline tax. Other pieces of infrastructure such as the sewage and water system work on the same principle. The idea of government activity in these areas is not new; it goes at least as far back as  Adam Smith. In his 1776 masterpiece,  The Wealth of Nations  Smith wrote: The third and last duty of the sovereign or commonwealth is that of erecting and maintaining those public institutions and those public works, which, though they may be in the highest degree advantageous to a great society, are, however, of such a nature that the profit could never repay the expense to any individual or small number of individuals, and which it, therefore, cannot be expected that any individual or small number of individuals should erect or maintain. Higher taxes which lead to improvements in infrastructure  can  lead to higher economic growth. Once again, it depends on the usefulness of the infrastructure being created. A six-lane highway between two small towns in upstate New York is not likely to be worth the tax dollars spent on it. An improvement to the safety of the water supply in an impoverished area might be worth its weight in gold if it leads to reduced illness and suffering for the users of the system. Higher Taxes Are Used to Finance Social Programs A tax cut does not necessarily help or hurt an economy. You  must  consider what the revenue from those taxes is being spent on before you can determine the effect the cut will have on the economy. From this discussion, though, we see the following general trends: Cutting taxes and wasteful spending will help an economy because of the disincentive effect caused by taxation. Cutting taxes and useful programs may or may not benefit the economy.A certain amount of government spending is required in the military, the police, and the court system. A country which does not spend an adequate amount of money in these areas will have a depressed economy. Too much spending in these areas is wasteful.A country also needs infrastructure  to have a high level of economic activity. Much of this infrastructure cannot be adequately provided by the private sector, so governments must spend money in this area to ensure economic growth. However, too much spending or spending on the wrong infrastructure can be wasteful and slow  economic growth.If people are naturally inclined to spend their own money on education and healthcare, then taxation used for social programs is likely to  slow economic growth. Social spending which targets low-income families is m uch better for the economy than universal programs.If people are not inclined to spend towards their own education and healthcare, then there can be a benefit to supplying these goods, as society as a whole benefit from a healthy and educated workforce. The government ending all social programs is not a solution to these issues. There can be many benefits to these programs which are not measured in economic growth. A slowdown in economic growth is likely to occur as these programs are expanded, however, so that should always be kept in mind. If the program has enough other benefits, society as a whole may wish to have lower economic growth in return for more social programs. Source:   The Capitalism Site - FAQ - Government

Comparison of Two Poems - 1156 Words

In two of D.H Lawrence’s works Bat and Man and Bat, both poems portray the author’s encounters with bats and his feeling of disgust towards them. In this essay I will compare the two poems in terms of tone, rhythm, diction and style. Both Bat and Man and bat started with a peaceful tone; the author describes the setting in Florence, Italy and gives a calming tone to the readers. However, as the author proceeds with the poem, and starts to introduce a bat, the tone starts to change. In bat, the tone changes gradually, the author wonders why a swallow would fly so late- at this point he describes the swallow’s movement and the tone changes; the readers sense a mysterious feel. When the author does confirm that the bird is in fact a†¦show more content†¦The scene where the author tries to escape the bat is a typical action scene, happening very quickly. The author uses more exclamation marks to tense and fasten the rhythm more and this fast rhythm really h elps the readers to understand the situation of the poem and also enhances the tone of disgust the author uses in the poem. Nevertheless, Man and Bat ended in a calming pace, the author reflects on the bat and threw away his grudges towards it- it leaves the readers content with the happy ending. However, Bat did not end as peaceful; the ending came abruptly, the author still hints a disgusted tone and the rhythm did not slow down- it even ended with an exclamation mark. This kind of ending leaves the readers hanging unlike Man and Bat. There were two main dictions in Bat and Man and Bat; diction for movement and diction for disgust. Both poems describe the bat’s movements in the air, going ‘round and round and round’ and in both works the author emphasizes on his revolt towards the ‘disgusting old rags’. In Bat, the author chose words such as ‘swallows with spools of dark thread sewing the shadows together’ when describing the birds m ovement; the readers feel the mystery of these swallows- yet not disgusted- and somehow the swallow’s flight seemed elegant. However, when realizing that these swallows were in fact bats, the author uses words such as ‘wildly vindictive’ andShow MoreRelatedComparison of Two Love Poems1628 Words   |  7 PagesComparison of two love poems ‘How do I love thee? Let me count the ways.’ is a poem written in the 19th century by a poet named Elizabeth Barret Brown. Assuming that this love sonnet was written from the poets point of view this poem is about how a lady loves her lover. The title suggests that this poet will list how she loves a certain person and in how many different ways and the poem does exactly that, Elizabeth also compares her love to things that it is not possible to live without. The languageRead MoreThe Comparison of Two Love Poems634 Words   |  3 PagesThe poem â€Å"How Do I Love Thee†, by Elizabeth Barrett Browning, and â€Å"What Lips My Lips Have Kissed†, by Edna Vincent Millay are both well-known poems that both have themes of love. (LIT, Kirszner Mandell, Pg. 490). In both poems the poet helps the reader experience a lot of emotion with the use of certain words. There are speakers in both poems. In Mrs. Browning’s poem, the speaker is undefined, leaving open that the speaker could be a he or she. Millay’s poem which is written in first person, theRead MoreComparison of Two Poems: the Tyger and the Lamb844 Words   |  4 PagesI chose to do the comparison between ‘The Tyger’ and ‘The Lamb’ because they both have similar themes but are concerned with very different aspects of life. ‘The Tyger’ concentrates on the dangers to be faced in life and nature while ‘The Lamb’ celebrates nature as seen through the innocent eyes of a child. Blake examines different, almost opposite or contradictory ideas about the natural world, its creatures and their Creator. William Blake is the narrator of both poems which emphasizes hisRead More Comparison of the Poems, Two Scavengers and Nothings Changed2676 Words   |  11 PagesComparison of the Poems, Two Scavengers and Nothings Changed â€Å"Nothings Changed† was written by Tatamkhulu Afrika, a mixed race child with fair skin, who was later adopted by a white South African family who brought him up as though he was white, and he only found out about his origins as a teenager. Tatamkhulu lived in a multi-cultural area called District Six, which was destroyed by the white authorities. He feels strongly about this kind of racism towards the black people despite theRead Moreâ€Å"Trout† and â€Å"Sonnet 130†: A Comparison of Two Poems Essay576 Words   |  3 Pagesâ€Å"Trout† and â€Å"Sonnet 130†: A Comparison of Two Poems In â€Å"Trout† by David Marlatt and â€Å"Sonnet 130† by William Shakespeare, both describe their loves in unusual, more complex ways then what is usually written in poetry. â€Å"Trout† describes a day where the speaker swims next to his love, and explains to her that she is as beautiful as a trout. Throughout the poem, however, there seems to be a tone of admiration, and the audience cannot hellp but feel that the speaker is giving his love one of theRead MoreEssay on Lanston hughes comparison of two poems828 Words   |  4 Pages Some poems might have stories of suffering or abuse, while others contain happy times and great joy. Regardless of what the poems contains, all poems display an expression. That very moment when the writer begins his mental journey with that pen and paper is where all feelings are let out. As poetry is continues to be written, the reader begins to see patterns within each poem. On the other hand, poems have nothing at all in commo n with one another. A good example of this is in two poems by a famousRead MoreA Comparison and Contrast Between the Two Poems, Poetry and Modern Poetry890 Words   |  4 Pagesit: There are things that are important beyond all this fiddle.† Poetry has been around for a long time. As the years go by poetry adapts to the time period. However, the authors have different views. Majority of them will read and enjoy all types of poem, but they have their own opinions. The new, has to be truly unique to the author and to the time period. Shakespeare still had plays that we study, but it is hard to comprehend the message behind the words. Worlds change and the literatures changeRead MoreComparison and Contrast Essay Between Two Poems of Emily Dickinson and Mary Oliver1295 Words   |  6 PagesComparison and Contrast Essay between two Poems of Emily Dickinson and Mary Oliver Emily Elizabeth Dickinson, or called Emily Dickinson for short (1830 – 1886) and Mary Oliver (1935), are the two poets who contributed great works of art to American society during the late nineteenth and early twentieth century. In spite of several characteristics that can be found in both Emily Dickinson and Mary Oliver poems, there are undeniably things that distinguish them from one another, although outsideRead MoreComparison of Two Poems: Shall I Compare Thee to a Summers Day and If Thou Must Love Me1155 Words   |  5 PagesComparison of two poems â€Å"Shall I compare thee to a summer’s day?† written by William Shakespeare and â€Å"If thou must love me† written by Elizabeth Barrett Browning â€Å"Shall I compare thee to a summer’s day† a poem written by William Shakespeare, is the eighteenth sonnet by this famous writer and a poet. Shakespeare, a popular english poet had written fifty four sonnets. â€Å"Shall I compare thee to summer’s day† is the most popular of all the fifty four sonnets which emphasized Shakespeare’s love poemRead MoreA Comparison of Two Poems Presents from my Aunts in Pakistan by Moniza Alvi and Search for my Tongue by Sujata Bhatt734 Words   |  3 PagesA Comparison of Two Poems Presents from my Aunts in Pakistan by Moniza Alvi and Search for my Tongue by Sujata Bhatt In this essay, I will be showing you how the writers use their own poetic devices within their work to their advantage and how the poets have used different themes to overcome in their own poems. To begin this essay, I will be presenting to you how Alvi and Bhatt have used different viewpoints within their poems to put across their message to the reader

Genetics of Alcoholism. Does Alcohol Dependence Depend of Race Free Essays

Alcoholism is very all known occurrence that have a place in every culture. Modern medical definitions describe alcoholism as a disease and addiction which results in a persistent use of alcohol despite negative consequences. Although this definition do not specify current and on-going use of alcohol as a qualifier for alcoholism, some do, as well as remarking on the long-term effects of consistent, heavy alcohol use, include dependence and symptoms of withdrawal. We will write a custom essay sample on Genetics of Alcoholism. Does Alcohol Dependence Depend of Race or any similar topic only for you Order Now Psychiatric geneticists John I. Nurnberger, Jr. and Laura Jean Bierut suggest that alcoholism does not have a single cause—including genetic—but that genes do play an important role â€Å"by affecting processes in the body and brain that interact with one another and with an individual’s life experiences to produce protection or susceptibility. † They also report that fewer than a dozen alcoholism-related genes have been identified, but that more likely await discovery. At least one genetic test exists for an allele that is correlated to alcoholism and opiate addiction. Human dopamine receptor genes have a detectable variation referred to as the DRD2 TaqI polymorphism.Those who possess the A1 allele (variation) of this polymorphism have a small but significant tendency towards addiction to opiates and endorphin releasing drugs like alcohol. Although this allele is slightly more common in alcoholics and opiate addicts, it is not by itself an adequate predictor of alcoholism, and some res earchers argue that evidence for DRD2 is contradictory. Also, studies indicate that the proportion of men with alcohol dependence is higher than the proportion of women, 7% and 2. 5% respectively, although women are more vulnerable to long-term consequences of alcoholism.Around 90% of adults in United States consume alcohol, and more than 700,000 of them are treated daily for alcoholism. Professor David Zaridze, who led the international research team, calculated that alcohol had killed three million Russians since 1987. In the United Kingdom, the number of ‘dependent drinkers’ was calculated as over 2. 8 million in 2001. The World Health Organization estimates that about 140 million people throughout the world suffer from alcohol dependence and dominant number of them is European people. 70% of Asian people, according to Svetlana Borinskaya PhD.Laboratory worker of institute of General Genetics behalf of the Vavilov, have a particular gene that works as a protector from alcohol addictive syndrome. My hypothesis statement is that Asian people are less predisposed to become an alcohol addictive that European people. In order to test my hypothesis I will use an experimental method. In my experiment I will need two groups of participants, both groups will be experimental. First group will contain 100 participants that belong to European race, second group will contain 100 participants that belong to Asian race with â€Å"Asian† gene of alcoholic protector.In my experiment I will try to select in general alike participant from the physical appearance point of view. Also they should not be active alcohol users or they should be people that never taste alcohol. There are criteria for participants: males, 25-35 years old, weight 70-90 kg, height 170-190 cm, average constitution, good health, average social status and average economical status. Experiment will last two months. In the beginning of my experiment I will place participants in two houses. During experiment they will have five ingestions per day: breakfast, dinner, snack, lunch and supper.Then every day before ingestion they will receive portion of vine- 400 g. and also they will have an access to vine. Vine intake before ingestions and free access to vine will lasts one month in the second month we will stop access to vine and also in taking vine before ingestion. And during whole this month observe their behavior. After second month of experiment we will give them a portion of vine. Also directly after experiment we will ask them to evaluate their self-appraisal about them from the alcohol dependence point of view.Then according to participants reaction to final portion of vine and also refers to a self-appraisal of participants we will collect and then analyze data. There are three expected outcomes of the research First, European people will demonstrate less tolerance to alcohol dependence then Asian people and it will mean that my hypothesis is right and â€Å"Asian† gene is worked as alcohol dependence protector. Second, there will be no difference between European and Asian people from the tolerance to alcohol dependence point of view it will mean that â€Å"Asianâ⠂¬  gene do not influence to alcohol protector mechanism.Third, European people will demonstrate higher tolerance to alcohol dependence then Asian people, it will mean that†Asian† gene do not influence to alcohol protector mechanism or works inversely than that we suppose. How to cite Genetics of Alcoholism. Does Alcohol Dependence Depend of Race, Papers