As many of you are aware, due to measures to combat Covid, many governments incurred steep deficits which added to the debt. Some governments are now contemplating tax increases to help reduce the deficit and/or debt. Possible ways of increasing revenue are to increase income taxes and/or sales taxes such as the GST/HST. Sources of income that taxes are paid on include labour (work) as well as business profits and investment earnings. Assuming that taxes are to be raised, which tax increase would be least detrimental to long-term economic growth, a GST/HST increase or an increase in income tax? Assume that either of the increases would be revenue neutral, i.e., the federal government would take in the same amount of revenue with either tax that is raised.
As many of you are aware, due to measures to combat Covid, many governments incurred steep deficits which added to the debt. Some governments are now contemplating tax increases to help reduce the deficit and/or debt. Possible ways of increasing revenue are to increase income taxes and/or sales taxes such as the GST/HST. Sources of income that taxes are paid on include labour (work) as well as business profits and investment earnings. Assuming that taxes are to be raised, which tax increase would be least detrimental to long-term economic growth, a GST/HST increase or an increase in income tax? Assume that either of the increases would be revenue neutral, i.e., the federal government would take in the same amount of revenue with either tax that is raised.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: Six Debates Over Macroeconomic Policy
Section: Chapter Questions
Problem 6PA
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