American government policy on taxes.
Taxation is one of the fiscal policies the government applies to collect revenues from the public. The government, however, uses revenues derived from taxes to finance development projects. Essentially, the higher the tax base, the higher the revenue accumulation; hence, the bigger budget proposed by the government to its citizens. Also, taxes can be used to achieve economic stability and also promotes social equity; for instance, the use of progressive income taxes. However, taxes play a prime role in determining the general welfare of the people. For example, there is a positive correlation between fees and consumption. For instance, when high taxes are imposed on goods (value-added tax), the use of such products is reduced in the economy.
Consequently, this creates a bad business climate for entrepreneurs and investors in the economy. Businesses record low revenues, which may cause liquidity and bankruptcy resulting in increased poverty levels in the country. Consequently, there is a notable decrease in the productivity of goods and services in the country. The government should, therefore, regulate and moderate taxes to achieve balance in the economy.
Taxation is also used as a fiscal policy tool to stabilize the economy. When the economy is growing at a faster rate, taxes are increased, leading to reduced consumption, which hinders investments in the marketplace. Conversely, when the economy is growing slowly, fees are reduced, resulting in more funds in circulation. This results to spur in economic growth due to increased consumption and investment. As a result, more businesses are target firmsup, which eventually leads to mass production of goods and services.
The U.S government, through the internal revenue service, imposes different types of taxes to fund its operations. Necessarily, both local and state governments receive charges from the citizens. However, these taxes are used to install social amenities such as roads, electricity, and water hence, easing the way of doing business. Property tax is an example of a local tax, which is imposed on the value of a real estate or even business property. Sales tax entails tax imposed as a percentage of the selling price of goods and services. However, this tax is not part of the seller’s earnings, since it’s later transferred to the local or the state governments. Also, there is the income tax, which is the levy on the earned and unearned income. Income tax rates vary depending on the location of the employee and the level of income.
The most recent tax policy occurred in America, where the U.S President, Trump initiated changes to the tax code. This process stems from 2017 and early 2018, when most of the politicians, think tanks, and also the media made a first response to the tax code changes. As a result, bank accountants and tax specialist informed their clients to update tax withholdings to avoid a huge tax bill in due time.
However, many changes in the tax code applied in the tax cuts and job act where the law did cut corporate tax permanently and individual rates temporarily. Consequently, it’s noted that those earning much shall benefit more compared to the low earners who are believed to pay more ahead 2025 once individual tax provisions expire. Additionally, the tax overhaul led to a deficit of 1.5 dollars, which resulted in those living in the high state to pay more in 2019. However, it was a relief to the banks, wealthy and
revenues, and estate tax.
There is a close association between politics and economic benefits voters. For instance, most politicians tend to lower tax levies and tariffs to the voters to woo their votes.