Using the Data and Your Economic Knowledge, Assess the View That a Reduction in Income Tax Is the Best Way to Improve the Performance of the Uk Economy in Both the Short Run and Long Run.

Because of the growth of the high unemployment rate employers may be unwilling to hire people. With more people out of work, more civilians face an unfortunate standard of living and lower quality of life. Generally, when the unemployment rate rises, consumers have less spending power. A lower unemployment rate, infers more people have jobs and are enjoying a better quality of life and higher standard of living. It also means that companies, firms, and organizations are receiving more money. When more people have jobs, they acquire more money and spend it. Such places include stores, malls, and fast food restaurants. This spending results in economic growth throughout our economy. Unfortunately, there will always be a percentage of people who do not have a job which implies that the economy will never experience economic growth to its full extent.

This means that the job market will grow and will allow the economy to improve as well.

Heated debates over tax cut have always been one of the central economic themes on the American political table. Since taxes relate directly to the quality of lives, it is by no means surprising to find people showing significant concern about policies regarding cutting or raising the amount they have to pay. The idea that lowering tax rate makes room for growth has remained generally popular among the majority, taking a possible decrease in individuals’ tax burden and increase in productivity into account. There is, however, extensive research conducted on the topic that produced controversial results. Despite its appeal to instant benefits for one’s saving account and investment, reducing tax rate has yet to show a definite positive effect

rate, in periods of higher income tax the GDP sees an increase thus proving that higher taxes do not create a drag in the economy. When the top marginal tax rate is at a 75 to 80 there is an about 4.6 GDP growth creating this “Sweet-spot”.

If the taxes for business are lowered, the businesses will be able to increase employment, and that will lead to the unemployment rate further decreasing, which will improve economic growth. In addition to that, the businesses will spend more on supplies and as it spends more on supplies, other businesses will get higher demand, and that will lead to more money that can be spent on multiple things such as hiring people, and improving production, and management efficiency. Eventually, this will be a ripple effect, and the Canadian economy will

This will lead to a raise in unemployment if they increase the wage rate. Even if they raise it, this will affect they society too cause the price of goods and services will be increased, it will also affect the supply and demand in the market. This policy is also called the Price Floor

Government tax cuts and taxation on the middle class always seems to be the debate in every election year in the U.S. This debate is always related to the federal deficit and our national debt. The pro side of the argument is that if you cut taxes the revenue generated for the government will fall and it will then expand national debt. But in the counter arguments on cutting taxes can stimulate the economy, leading to an increase in government revenue with the redux in tax rates. According to Forbes article “Do Tax Cuts Increase Government Revenue?” “Using the data from 1913 through the end of 2011, the correlation between the maximum marginal income tax bracket and total Federal receipts is a negative 0.50. In simple terms, when taxes are cut, Federal revenue has a very strong tendency to rise! And when taxes are raised, government revenue has a strong tendency to fall.” ("Forbes Welcome", 2016). I believe the tax cuts proposed to the 95% of the country will have the intended a stimulus effect on economic consumer spending which leads to an increase in government revenues and eventually work its way down to a rise in the real GDP. The tax cut policy should generate revenue and show positive results in Home Depot’s financial gains. I believe the lowering of the tax rates will increase disposable income, and boost consumer spending, directly again home depot and the economic growth and it should succeed in its intended goal of creating a higher standard of living.

Expansionary fiscal policy results in a reduction of taxes and increased government spending and therefore increasing the demand level in an economy. The institution of expansionary fiscal policy raises disposable income through reduction of taxes in the economy and this improves the rate of consumption. Therefore, tax reduction is an appropriate expansionary fiscal policy that can be deployed to help an economy that could be undergoing a recession (DeLong & Summers, 2012). Consequently, tax reduction could be a vital government tool for increasing the Gross Domestic Product. Low taxes encourage individuals to work hard and thus boosting the county’s GDP.

For example, the CCC (Civilian Conservation Corp) gave young men 18-25 years old jobs. The men had to replant forests, drained swamps and fought fires. They had 3 meals a day and were paid $1 a day plus room and board (source G). Also the WPA (Works Progress Administration) created 8 million jobs. They built 120,000 public buildings and ½ million miles of road. Artists would paint murals on the walls and people were hired to build hospitals, schools, post offices, parks, airports etc (source G). Resolving unemployment help everyone in the economy because when people finally got their paycheck they’re most likely going to want to spend it. Once they spend it more businesses are going to do well and then when those employees get their money the cycle will keep

This all leads to higher consumption within the economy. It can also increase labour productivity as higher wages will motivate workers to perform better. This

Government intervention also promotes better equality particularly in income and wealth distribution. Furthermore, with government macroeconomic intervention, unemployment rates are reduced and the nation is well able to cope with protracted recessions.

Taxes are a necessary component for operating a government, however, they are also the source of great debate within our society. Especially when considering what types of taxes to use, and how much to tax the population without negatively impacting the economy. Income taxes are currently one of the biggest sources of income for the government, but are also one of the biggest concerns given the level of complication involved with the current tax system. Although many argue that the current progressive tax system contributes to our country’s economic growth, research indicates there may be benefits for simplifying the income tax system without stalling growth. One theory indicates implementing a flat tax system would not only provide consistency for businesses and consumers, it would positively impact economic growth. If given the appropriate considerations, including an equitable rate, a flat tax would increase consumer confidence and lead to an increase in consumption, and ultimately growing real gross domestic product (GDP).

Increasing government spending (military and infrastructure) and investment tax credit by the maximum, ten percent, and decrease income tax and payroll tax rate by the maximum, negative ten percent improved real growth GDP by a positive four percent and reduced the unemployment rate by five to fifteen percent. Real growth GDP and

In contrast, that they would raise interest rates and thereby reduce output in both the short run and the long run. GDP (Gross Domestic Product) is commonly used as an indicator of a nation's wealth, it also directly affected by federal taxes. Consumer spending typically stand for most parts of GNP. As we would expect, lowering taxes raise family income, promoting the consumer to spend their additional sums, thereby, enhancing GDP (GDP = C + I + G + NX).Since less money paid to the tax authority means more money in pockets of consumers, reducing taxes, therefore, shift right the aggregate demand curve as consumers demand more goods and services with their higher incomes. As shown in Figure 2, if tax cuts succeed in increasing economic growth, in this simple sense, the cuts will shift both aggregate demand (AD) and aggregate supply (AS) because the price level for a supply of goods will be reduced, which often leads to an increase in demand for those goods, as demands of consumers are met by suppliers.

A deep study should be done before implanting this policy to see if personal income tax has the negative effect on people. Then if it is found to be a problem, several measures should be taken into account including reducing the rate of paying the personal income tax. I would recommend both Robert and Drishti to explore more about this topic, especially from the political perspective. In other words, I am with the solution given by the deputy director Jill Scot concerning making a deeper analysis on the political implications of removing personal income