Taxes And Subsidies Affect The Price Of A Good Or Service

Approach 1: Taxes can be used to force businesses to pay for external costs. When a business’ action creates a cost, it would be taxed to pay for damages. This approach can be hard to use. How do we prove that a particular business caused harm? How much should damages cost? If the “right” amount is chosen, businesses will find other ways to create or offer goods and services because the taxes are too much. But sometimes the costs decided by legislatures, government agencies, or judges are not enough to stop an externality. Businesses decide it is more profitable to pay the tax than change its actions.

Business taxes can have a huge impact on the profitability of businesses and the amount of business investment. Taxation is a very important factor in the financial investment decision-making process because a lower tax burden allows the company to lower prices or generate higher revenue, which can then be paid out in wages, salaries and/or dividends. Business taxes include, Federal Income Tax; a tax levied by a national government on annual income, Payroll Tax; a tax an employer withholds and/or pays on behalf of their employees based on the wage or salary of the employee, Unemployment Tax; a federal tax that is allocated to unemployment agencies to fund unemployment assistance for laid-off workers, and Sales Tax; a tax imposed by the government at the point of sale on retail goods and services. Sales tax is based on a percentage of the selling prices of the goods and services. Consumers pay sales taxes, but effectively, business pay them since the tax increases consumer’s costs and causes them to buy less.

Taxes is when the state takes a percentage of the money you make to help the community or the state. Also one reason we get taxed is to pay off the government workers. Another reason we get taxed is to pay for the public buildings and public roads we use like libraries, schools, and highways. Finally another reason we get taxed is to help the poor or less unfortunate also to help an organization.

One microeconomic concept Proposition 56 relates to is supply, demand, and equilibrium. Taxes imposed by the government reduce both demand and supply, and cause the market equilibrium to increase and quantity to decrease. Consumers will not want to purchase because of the increase in

Taxes are the dollars that we pay to government to supply the services that are not or can not be provided through the free enterprise system. Taxes have been around since the beginning of organized societies. They come in various forms. Most common are income taxes both federal and local government. These taxes are assessed on the amount of income a person earns. Other taxes come in the form of user taxes; these taxes are imposed on the people that are using the goods being taxed, such as gas tax, alcohol tax, sales tax, and luxury taxes. Property taxes make up the major revenues for local and city governments. Furthering the burden of taxation are taxes that are attached to such bills as utility

Taxes discourages market activity and/or growth. Taxes disrupts the markets natural equilibrium by artificially raising the price of the good. The customers reaction to the higher price is to buy less of the good, and manufacturers reaction is to provide less of the good at a higher price to remain in business.

However a regressive tax is the exact opposite. Higher-income taxpayers pay a smaller percentage of their income than lower-income taxpayers because the tax is not based on ability to pay. A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder, such as sale taxes. When a regressive tax is based on consumption such as a sales tax, it can introduce an element of freedom of choice. However, only the consumers whom choose to use the particular good or service must pay the tax that follows, and those who consume more frequently most pay more taxes than the occasional users. However, consumers have some measure of control of how much they pay in taxes. For instances, if the consumer wishes to reduce what they pay in taxes, they can cut back on or eliminate the use of that particular good or

The history of taxes can be traced back to Ancient Egypt, where scribes were used by Egyptian Pharaohs as tax on cooking oil to make sure appropriate amounts of cooking oil were consumed. In Rome there were custom duties on imports and exports named portoria. Slaves had 4% sales tax and 1% for everyone else. Colonists were paying taxes under the Molasses Act which was modified in 1764 to include import on foreign molasses, sugar, wine, and other commodities. Settlers in 1794 started what was called the “Whiskey Rebellion” and rioted against the tax collectors. When the 16th Amendment was passed it allowed Congress to tax the citizenry or income from whatever source derived. Taxes are one of the biggest issues the world has, but the way taxes are collected is an even bigger problem. Everything you buy includes a sales tax that increases the price of something when you buy it. Taxes can be the difference between having just enough to buy something and not being able to buy it at all. People work their hardest all week to receive a paycheck where money they deserve is deducted from

While all citizens must pay taxes, the details of how taxes are used or where they are mostly taken from compared to other countries are not known by many. When compared to countries like Denmark or Mexico, it is seen that although certain aspects are similar, not everything is the same. The tax system of countries may differ from the government structure, as well as the services that the taxes pay for. Different countries also have different tax rates as a percentage of their GDP, as well as different median incomes, populations, and major resources. Living in the US might make it seem as if the system currently in place is the most important to study, but comparing systems with other countries allows for a broader outlook on things,

Have you ever thought about how an increase in sales tax can affect you? Sales tax has a big effect on everyone who is old enough to purchase items. Sales tax is a tax that the government imposes on goods and services. Sales tax should be increased because they help bridge gaps in state's budget, help fund new things, and help save jobs.

The implementation of subsidies in a specific industry cause major distortions in the market. The distortions are created because the subsidy creates a rent that is unable to be competed away. The rent that is generated is especially problematic when considering subsidies that are only available to current firms in the industry. The firms that join the industry after the subsidy is implemented are unable to compete with the lower price created by the subsidy. The benefit that the producer receives from the subsidy causes a gain in profit in the short run which the firms want to maintain into the long run. Furthermore, in the long run, since this surplus is considered a rent, the firms who receive the surplus are much better off than the

5. Suppose a market in which demand is more elastic than supply. The incidence of a tax will? fall more heavily on sellers than buyers.

Subsidies, by means of creating a difference between consumer prices and producer costs, brings change in demand/ supply decisions. Subsidies are often aimed at :

Taxes have significant effect on shifting supply and demand curves, which changes the market equilibrium price and quantity.

1) Tax is the amount of money demanded by government to financially support the economy. The main two types of tax are direct tax and indirect tax. Direct taxes are levied on the income, property, or wealth of an individual (e.g. Income Tax & Corporate Tax). Direct taxes tend to be progressive, efficient, and flexible. However some will also argue that it encourages tax evasion, disincentive to work, tax havens which results to leakages, and is unpopular with the electorate. On the contrary, indirect taxes are charged upon goods and services, thus affecting citizens indirectly (e.g. VAT & Council Tax). It is effective because it let the people decide whether or not to pay it. However, taxes like VAT are regressive towards citizens.