What’s good about lowering taxes under the fiscal policy and lowering interest rates under monetary policy?
August 25, 2008
kiyo-kyo asked:
What’s the effect on future inflation?
What’s the effect on future inflation?
President Bush has decided to pass out tax rebates and lower the income taxes while Ben Bernanke are lowering hte interest rates on the bank borrowings.
August 28th, 2008 at 6:40 am
Lowering interest rates (monetary policy) increases the money supply, but may increase inflation.
Lowering taxes (fiscal policy) increases the amount of money available for people to spend, stimulating the economy, but increases the deficit.
August 30th, 2008 at 2:20 pm
Tax Rates do not equate to Tax Revenue. Additionally Tax Revenue is not a productivity assessment that can be used to assess whether a tax policy is good. ( )
Tax revenues are an overhead burden on the population. You are forgetting that the government does not produce products.
Consider the extremes for tax rates:
If taxes were set at 100% then no one would work, the government would be eliminated (maybe that is you goal, but I prefer a government like the US), and all assets would be offshored. If taxes were reduced to 0%, then everyone would work as much as possible and companies will invest in your people. A very low tax rate allows people the opportunity to work while taking care of defense and those with real disabilities.
Question you should ask yourself: Do people prefer fairness for all to wealth for all? Why do you rank fairness based on the amount of taxes paid? Why not base fairness on consumption since that is the only valuable?
{The minimum wage topic also often leads to the same path: }