what is the result of lowering and raising taxes?

Question

two seperate questions

Answer 1

Depends on where on the Laffer Curve you are.

The Laffer curve is roughly a bell shaped curve with tax rates running along the X axis, and government revenues running along the Y.

At the two extremes, 0% tax rate, and 100% tax rate, the government collects nothing (no one has an incentive to work at a 100% tax rate).

From 0%, raising the tax rate increases government revenues; from 100%, lowering the tax rate increases them; and vice versa.

Of course, this curve has a max (dy/dx = 0) where you have maximum possible government revenue, theoretically there is only one tax rate that can accomplish this.

Answer 2

The most straightfoward answer is that raising taxes means that people will have to give more of their money to the government and that lowering taxes means that people will have to give less.

However, taxes can have a big impact on the entire economy.

For one, most economists agree that a modern economy cannot function without some government help (at minimum police and courts). For the government to operate it must pay salaries to its employees and that means that it must raise money somehow. Taxes are the standard way. Note, that the government of Monaco (a small country the French Riviera) does not use taxes. Instead, it owns the famous Casino at Monte Carlo and use casino revenue to fund the government.

So, lowerng taxes can mean that the government has less money.

However, in the modern world taxes are usually a percent of something -either what you earn or what you spend.

So if taxes go up, either you get to keep less of your paycheck or things cost more.

Some economists believe that this will cause people and businesses to work less and therefore the economy will shrink when taxes rise

Answer 3

Businesses will consider tax as a form of cost. This is because all businesses will have a budget to follow when producing, and paying tax will decrease that budget, and in turn, less of a good can be produced. Since less of the good is produced due to tax, the business will try to increase the price of the goods in order to recover the costs incurred by the tax (indirectly transferring the burden of government tax to the final consumer).

So with that said, increasing the tax on businesses will lead to a higher price of the good for the final consumers; and conversely, decreasing the tax on businesses will lead to a reduction in price for consumers.

Answer 4

Raising taxes increases the cost of items without either increasing the quanity or quality. Lowering taxes does the opposite. The rest is simple.

Answer 5

Raising taxes result an increase of the disposable revenue that will affect negatively consumption. It will discourage all kind of investments.
Lowering it has a positive effect to households & investors, but it can harm the national budget.

Taxes must exist. It's the taxation form that have to be equitable.

Answer 6

Lowering taxes means that the people will have more to
spend, which is good for the economy. Increasing
taxes does the opposite.

Answer 7

lowering taxes is making people happy, and make a more soft economy for people of middle and poor class (they can use that money ion paying other bills, doesn't look important, but if you apply it to 20 millions people, Portugal's population, it can raise wealth among people) and raising taxes you make people unhappy, and normally much of that money goes to bureaucrats pockets, but the state can pay some bills like wages in hospitals, and that kind of things