Tax Cuts/Raises - Term Paper Example

ome of the portion of taxes also pay off the state’s debt and for the betterment of the citizens for example, education system, public hospitals, health care, pensions, unemployment benefits, funds for the less privileged, public transportation, energy, water, public utilities and waste supervision. Tax system includes one important feature is that the percentage of taxes is according to one’s consumption and income. Proportional, progressive, regressive are certain style of taxes. These terms explain how tax rates goes from high to low or low to high or proportionally.

There are mainly two types of taxes “Direct tax” and “Indirect tax”. Direct tax is the one that is charged directly on your income for example, Income tax and Indirect tax includes excise duties, tobacco, oil, bills etc. Cuts/Raises in tax keep occurring. The government keep changing their tax policies to avail maximum revenue and also according to the ease of their citizen and according to the global market. For Example, the taxes on items like gold, fuel, oil, and precious stones depends upon the global market.

However, Cuts/Raises is one of the most controversial topics in economics as it is directly associated with economic growth. Many economist claims that a reduction in taxes will lead to prosperity and economic growth. Where as others claim that reduction in taxes, will make the richer more rich as all the benefits will be enjoyed by the rich, as they are the ones who pay most of the taxes. There are many different opinions and controversies about the Cuts/Raises of taxes. In economics the concept of “the laffer curve” is used to show the relationship between the government and the revenue raised by taxation and all possible rates of taxation.

As a general rule when government takes more taxes then it spends, it reduces disposable income and slows the growth of the economy. “Higher tax rates reduce the rewards of work and investing. This can have supply-side effects