Can the government lose money by imposing taxes?

Question

thoughts? for business math class..

Answer 1

Of course...tax policy affects investment behavior.

There have been three major tax cuts in the last fifty years. JFK, Reagan, and Bush all three cut taxes across all income ranges...and all three times, federal revenue INCREASED.

There have been two major tax increases in the last fifty years. Carter and Clinton both raised taxes across all income ranges, and both times federal revenue DECREASED. During Clinton's last two years in office, revenue increased...but only because he was lucky enough to have that enormous "technology bubble", when the economy grew exponentially in response to enormous investment in technology companies. After the technology bubble burst in 1999, federal revenue decreased during his last two quarters.
Carter, of course, saw federal revenue plummet during his administrion....but only because his economic luck was as bad as Clinton's was good. Carter had the oil crisis hit during his presidency...and it was a REAL crisis, too. During all our recent "oil" problems, there was always plenty of gas available...you just had to pay dearly for it. During Carter's administration, stations would run OUT of gas, and not have any for weeks at the time.

Answer 2

Yes. It is possible to reach a point of diminishing returns, where businesses and products are so highly taxed that it significantly reduces the number of people who can afford to do business or purchase products. The amount of money the government can then collect begins to go down; raising taxes even further to compensate for the lack of revenue only makes the problem worse. Reducing taxes frees up capital that people then can put into business growth and purchasing.

Answer 3

The government can decrease tax revenues by raising taxes and altering the behavior of the primary taxpayers (the rich).

Lowering taxes can also lead to increased tax revenue as has happened following the recent (and so-called) tax cuts for the wealthy. Wealth creation is necessary for tax revenues to increase and in order to promote growth (and even higher levels of tax receipts).

If anyone (especially a campus-sheltered professor) tells you different, they are lying and distorting the facts. Just check the figures released by the IRS.

Liberals have always been dumbfounded with regard to tax policy and seem to have some mental block when it comes to understanding how it works.

Answer 4

Yes.

Taxes wether intended as punitive or not tend to punish some activity. Whatever the activity being taxed is, people tend to avoid it.

If the activity is making money in some way(commerce), that activity tends to diminish.

When the business activity diminishes so does revenue, so does employment, so does consumer spending, so does the market.

It has been demonstrated that when excessive taxes are cut, revenue increases. Of course logic suggests that some diminishing return would kick in at some point, but in recent times, I dont think taxes have ever been low enoug to see that.

Answer 5

Yes. The reason is that (and you can look up this year's tax revenue to back it up) people spend more money when they have it, thus raising the prophet on businesses; therefore, they pay a higher amount of tax.

Answer 6

1. They lose the money they saved.
2. They get less the following year.
Budget director scolds them for requesting too much last year.
Change needed: Reinventing Government

Answer 7

I don't see how ? :)

Answer 8

for sure