StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

How Taxes Affect Economic Efficiency - Essay Example

Comments (0) Cite this document
Summary
How taxes affect economic efficiency The topic of potential benefits of taxes on the economic efficiency of a country has gained much attention in the recent years. It is true that various initiatives taken by a government have a significant impact on the scope of economic activities…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER99% of users find it useful
How Taxes Affect Economic Efficiency
Read TextPreview

Extract of sample "How Taxes Affect Economic Efficiency"

Download file to see previous pages According to Keynesians, tax cuts have a negative impact on the growth of wages (Ryan, 2011). There are some countries where governments encourage international trade while on the other side, some raise barriers. Some governments impose just enough tax to support various government expenditures while some levy taxes which burden the whole population (Kroeger, 2011). Adam Smith is revered in the field of economics because of his remarkable work on free-market economics and taxation. There are many economists of the modern times who consider Adam Smith the best tax economist of all time. According to Smith, the resources of a nation are allocated in the most efficient manner through an 'invisible hand'. According to Smith's view, taxes should be levied in such a way that they optimize and satisfy four variables. These variables include equity, transparency, convenience, and efficiency. According to Smith, by imposing limited taxes, economies can maximize their wealth (Kroeger, 2011). Taxes are imposed by a government to support some basic functions. These legitimate functions include education, defense, and the construction as well as maintenance of roads. In a market economy, the allocation of resources depends on the forces of demand and supply. In order to understand the ultimate impact of tax on economics, it is imperative to evaluate this impact in terms of the purchasing power of individuals as well as the economy's aggregate supply. One of the basic concepts of economics is that an increase in demand leads to the production of more goods and services in order to fulfill the demand. It implies that if producers can sell more because of an increase in demand of their products then they need to produce more goods to satiate the increasing demand. The imposition of tax deprives tax payers from a portion of their money that they would have spend on consumption. If it is accepted that the imposition of tax only deprives people from money than it would be concluded that taxes have a negative impact on economy. However, by looking at the other side of coin, it can be comprehended that the money which people spend on taxes eventually turns into government's income. Government spends this money on the welfare of the public which in turns enhance the economic growth (Kroeger, 2011). The income of one person depends on the spending of others. When government spends the money, it ultimately turns into the income of the public. Similarly, when the public pays taxes, it becomes the income of the government. So, it is wrong to say that the imposition of taxes drops the aggregate spending in fact it causes it to increase. If tax payers save their money instead of paying taxes, it will impact government expenditures and will decrease the overall consumption and in turn the overall economic efficiency. Similarly, if government saves money and does not spend it then it would ultimately affect the public. It proves that the act of saving money is not beneficial for the overall economy of a country but it creates problems. This act is really harmful for the economy of the country. A very obvious example of the harmful effects of this act is the Great Depression. The Great Depression occurs because people who could have opted for spending money chose to save it. However, those who wanted to spend money were deprived of it (Kroeger 2011). The long term expenditures of government increase with the growth of population. Therefore government needs money to ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“How Taxes Affect Economic Efficiency Essay Example | Topics and Well Written Essays - 1500 words”, n.d.)
Retrieved from https://studentshare.org/macro-microeconomics/1432227-how-taxes-affect-economic-efficiency
(How Taxes Affect Economic Efficiency Essay Example | Topics and Well Written Essays - 1500 Words)
https://studentshare.org/macro-microeconomics/1432227-how-taxes-affect-economic-efficiency.
“How Taxes Affect Economic Efficiency Essay Example | Topics and Well Written Essays - 1500 Words”, n.d. https://studentshare.org/macro-microeconomics/1432227-how-taxes-affect-economic-efficiency.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF How Taxes Affect Economic Efficiency

Correlation between Motivation and Efficiency

It also has many warehouses to deliver chilled and frozen food to customers. It is highly unpleasant for the workers to work in the chilled warehouses. Just five years ago, one of the warehouses in Stroke-on-Trent introduced a new technical system that transformed the attitude of the workers and their efficiency.
Though the company spent almost £ 300,000 on installing a new system, it reckoned that by cutting down the mistakes and providing a better workplace for workers it could save that much amount in the first year itself. Prior to the installation of a new communication system, workers felt much boring with the old techniques of writing the movements of goods by a bit of paper and pencils. Apart from mistakes and e...
6 Pages(1500 words)Research Paper

The Economic Impact of the Emergence of China and India

The main macroeconomic variable that toys in the global economy’s shift are the emergence of India and China as new superpowers. This emergence certainly has a number of implications, but among the most relevant are: disruption of the equilibrium of the global economy which results in rising demand of goods, giving way to worldwide inflation; the attractiveness of outsourcing to these countries due to low cost but high talent workforce of these countries for cheaper operations.
The growing middle class of China and India results in booming demand for the automobile industry. This increase in demand, with the increasing purchasing power of these countries’ people, is not limited to automobiles but more apparent in...
10 Pages(2500 words)Assignment

Efficiency and Profitability of Exxon Mobil

This increase could signify a change in credit policy for the company to stimulate more sales. The average collection period is computed by dividing the accounts receivable by daily credit sales. According to the computation for the year 2007, both the level of accounts receivable and daily credit sales have increased.
Accounts receivable turnover goes hand-in-hand with the average collection period—the longer the collection period, the lower the collection turnover. This is also evident in the trend of the accounts receivable turnover. This longer collection period and lower accounts receivable turnover, while it has some advantages over boosting sales, definitely impacts the liquidity of the firm and availability of t...
11 Pages(2750 words)Case Study

Do Violent Video Games Affect Behaviour

Video games are all kinds that are famous between children and adolescents on the basis of their usage of enhanced technology and diversity. People have shown interest in all kinds of video games and violent games are one of them (Anderson, Gentile and Buckley 2007). Gentile and Anderson inform in their work, “Violent Video Games: The Effects on Youth and Public Policy Implications” that parents pay a little attention to children’s usage of violent video games. According to them, the parents stop their children to stay away from all kinds of violence but their attitude towards the violence in media and video games is negligible (Gentile and Anderson 2006).
Freedman informs in his article, “Evaluating t...
7 Pages(1750 words)Assignment

How Does the US Media Effects Evolve in Singapores Current Media

Lewis and Slade (2000, p. 223) in their critical evaluation of the effects of media communication on the audience argue that media effect is achieved incongruent with social context. Their study recounts the experiment on the influence of television on identity in Singapore indicates that US social values and Singaporean values greatly differ from each other. The sharp differences in program content have a negative influence on the audience because Chinese raised Singaporeans value marriage, social values, and collectivism whereas US social culture involves career, family and the struggle to balance the two. Therefore the question of US media's influence to destabilize Singaporean national identity is limited. This view is emphasi...
6 Pages(1500 words)Assignment

How to Choose the Right Job

In a research that was conducted by the London School of Economics in 2005 – 2006, it has been seen that almost 61.6% of the students worked after graduation (LSE, 2008). According to Little (2007), the link between high education and employment is very high.

“Employability is a set of achievements – skills, understandings, and personal attributes – that make graduates more likely to gain employment and be successful in their chosen occupations, which benefits themselves, the workforce, the community, and the economy” (Little, 2007)

The research highlighted the strong points that are developed by students and the percentage of skills that are developed post-high education program...
6 Pages(1500 words)Research Paper

How Tomatoes Can Help Your Heart

Whether tomato is a fruit or vegetable? Well, this question can be answered in both ways. Botanically, tomato is a fruit but it is so frequently used as a culinary item all over the world, it is also considered as a vegetable. Long time back, the tomato was considered as fruit and helped the exporters to avoid taxation but 1893 the Supreme Court put an over this dispute by declaring that tomato was a vegetable and since that time onwards, tomatoes were taxed accordingly. Keeping in harmony with this tradition, till date tomatoes are served as entrée and very rarely as dessert. Apart from side dishes, wide array of main course dishes are also prepared from tomatoes and these dishes are regarded considered as lip-smacking cui...
6 Pages(1500 words)Case Study

Economic Analysis of India

The country’s economy is fast growing with a stable political system that encourages foreign investment although with certain restrictions. The country generally has good energy, transport and communication systems which make the cost of doing business affordably.

The Republic of India found South of Asia is by far the world’s most populous democracy and ranks seventh largest in terms of geographical area (Brown, 1994). India is also the second most highly populated country in the world. The country has a rich culture with four major religions having originally emerged from it; Sikhism, Buddhism, Hinduism, and Jainism. The Indian Republic consists of seven union territories and 28 states and ranks twelfth la...
8 Pages(2000 words)Case Study

International Business: World Economic Forum and Davos 2010

While each force of globalization is important, the technological revolution has impacted the business models, value creation and differentiation (Spelman, 2010). The cloud computing technologies that have made the popular social networking applications possible are now being applied to development, healthcare, and society. Today mobile telephones are more like powerful computers that take care of many of the societal challenges facing both developed and developing countries (Evans, 2010). In Chile, new software enables weather information to farmers who can now make informed decisions on when and how to sow or harvest the crops. However, the fear or ignorance of cloud computing technology could harm the chances of the SMEs becomi...
7 Pages(1750 words)Coursework

Globalization and World Economic Forum at Davos 2010

...Globalization and World Economic Forum at Davos Forces Driving Globalization Globalization has resulted in enhanced interdependencies among thenations of unprecedented scale. This augmented interdependence has caused the dismantling of trade barriers and liberalization of markets. The forces of globalization have impacted the nations, the firms and the individuals alike with the prerequisite of liberalization of trade (Awuah, 2009). The seven forces of globalization are; Markets, Production, Culture, Labor, Technology, Environment and Liberalization. Of these factors, the globalization of markets has engaged substantial attention of the firms and the academia. Some markets are highly globalized, while some are not. The scale of market...
7 Pages(1750 words)Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic How Taxes Affect Economic Efficiency for FREE!

Contact Us