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Government Taxes

In: Business and Management

Submitted By Jodi876
Words 1050
Pages 5
BUAD 325 Sections 002
March 27, 2014
Key Concept
Chapter 15 – The (Dis) incentives of higher taxes
Thesis statement
The government wants to increase the amount of revenue that is collected each year by placing higher taxes on certain products and income tax which, in turn, have a negative effect on supply and demand.
Supporting economic points
Economics Principles

Supply and demand- this is the amount of good or service that is available and the desire for it. The demand or supply of a good or service by a consumer will be a factor in regulating prices. In the case of the luxury tax that was implemented the demand for the goods changed and people found substitutes or other alternative to replace their needs. This change is not dependent on the status (lower, middle or upper class) of a group or individual.
Incentive work – this is the things that encourages or motivate a person to do something. Humans on a hold are slaves to their own reward systems and will do what it takes to get rewarded. In this chapter there are clear examples. People are willing to work harder if they will pay taxes in a lower tax bracket, while on the other hand, people are willing to stay home and live off government grants and benefits – subsidized housing and health food stamps, etc, than paying high rate employment tax to the government. This point also ties in with opportunity cost that will be defined and discuss below.

Opportunity cost- this is the value of the best forgone alternative or in layman language it is the value of giving something to get another. People are not willing to give up a life of welfare where things are free to go out into the working world to pay higher bracket income taxes to the government. If the government provided lower corporate tax rates and tax breaks people will be more willing to get a job than to stay home and collect welfare. This is

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