What kind of tax policy would you suggest to offset the fiscal drag? Explain.?

Question

The fiscal drag is an undesirable built in stabilizer that prevents te economy from recovering from a state of high umemployment and low economic acitivy.

What kind of tax policy would you suggest to offset the fiscal drag? Explain.

Thanks!

Answer 1

Land Values should be taxed at a minimum of 6% p.a. and a maximum of current market interest rate, but exempting all improvements on land. Then do away with income taxes. Henry George, the American Social Philosopher explained this more than a hundred years ago in his book "Progress and Poverty."

"To the producer belongs the produce of his/her own labor." This is the economic law of distribution.

Land values are created by society, It belongs to the people. Therefore the government of the people should collect it via land value taxes. Improvements on land are the product of individuals, therefore they should not be taxed.

This tax policy will:
a) force all landowners to examine their land holdings and to use them for productive/profitable purposes instead of keeping them fenced waiting for price increases brought about by improvements in society and the exploding population. Citylots are the most valuable. City Landowners will find it more expensive to keep these landareas purely for speculative purposes only. Since there are no taxes on improvements, they will build office buildings, apartments, etc, and the ghettoes disappear. As every landowner go into productive activity, they will employ labor. Unemployment decreases.
b) those areas they cannot use productively/profitably, they will choose to sell. But when every landowner goes out selling their unprofitable landholdings, the price of land will go down to non-speculative levels and become more affordable to those small capitalists who can afford to use them for productive purposes further reducing unemployment.
c) those areas which cannot be sold as there are no takers, the landowners will return it to public domain rather than pay taxes for unprofitable land. Cityfolks who have yearned to one day have a farm to retire on, can now do so inexpensively and be productive at the same time. Also, all those who cannot find a job will now have an alternative - go back to land and produce what he needs, further reducing unemployment.

This tax reform provides incentive to production by not taxing it. It forces all productive land into use and does away with land speculation. It removes taxes on income thereby increasing purchasing power in the hands of the populace.

Answer 2

Fiscal drag is mush less of a problem than you think. In an open economy with floating exchange rates, fiscal policy impacts only the direction of capital flows. The level of domestic economic activity is only impacted by monetary policy.

Answer 3

i recognize only somewhat, thinking I also have a bachelors in finance, a masters in economics and over a decade of adventure in the economic sector. yet you do no longer even choose any of those, all you like is eyes and ears and half a innovations and you will verify out worldwide places like Greece, Spain, and others in Europe who've honestly ruined their economies with the aid of over taxation, failed socialistic regulations, and an overpowering burden of overpaid and below labored government workers which make up over 0.5 the artwork forces in those worldwide places. The severe-tax, redistributive, government administration of corporation approach has been used time and time lower back in many socialist and so-referred to as communist worldwide places and that's yet to succeed, with few exceptions, those being a number of the Nordic states the place there are small, homogenous populations and fairly a lot of organic components. Capitalism works, the fulfillment of the USA proves this...Keynesian economic regulations stifle economies, and countires like Greece teach this. every person with 0.5 a innovations is common with this, however the leftists do no longer care that Keynesian regulations do no longer artwork, all they care approximately is that's makes it "honest"...honest as in every person has equivalent quantities of no longer something, and the government controls each and every thing. Capitalism isn't suited, there are going to be winners and losers, in spite of the undeniable fact that it is the main suitable answer we've, and to have useful capitalistic economies, companies and human beings that contribute with labor and capital won't be able to be stifled with severe taxes in the call of increasing government and "fairness", or all of us lose.

Answer 4

Lowering taxes boosts the economy because it gives everybody more disposable income and they in turn buy more and retailers make more money and hire more people.