Readers Question: If a progressive taxation is going to supposedly “reduce the gap between the rich and poor”, how and why does this happen? A progressive tax means that we take a higher % of tax from those on high incomes (e.g. a 50% income tax rate for income above £150,000). If everyone paid a …
There is often much discussion about the impact of tax and benefits on the distribution of income. This is an interesting graph which shows the impact of different taxes and benefits on income distribution. As expected, direct taxes (like income tax) are progressive – i.e. they take a bigger % of income from high earners. …
As the old saying goes there are two certainties in life – death and taxation. So why not combine the two and raise revenue from inherited wealth? I have written on this topic before Why are we reluctant to tax Wealth? But, I would like to make another case for why a ‘death’ tax meets …
The arguments for and against the legalization of cannabis and the taxation of the good by the government. Legalising cannabis and placing a tax on the good has several advantages Advantages of legalising cannabis 1. The Government can raise revenue from the tax. Because demand is likely to be inelastic, the tax revenue could be …
Why is monetary policy easier to conduct than fiscal policy in a highly divided national political environment? Monetary policy is usually implemented by independent monetary authorities. For example, in UK, monetary policy is implemented by the Monetary Policy Committee of the Bank of England. Therefore, they can take politically unpopular decisions such as increasing interest …
The impact of government borrowing on industry. Generally, government borrowing of over 3% of GDP and National Debt of over 60% of GDP is considered to be harmful and if government debt is too high it might start to deter foreign investment. Budget balance This is the amount the government need to borrow from the …
Readers Question: Why government, rather than private industry, is required for an effective mosquito eradication program? An effective mosquito eradication program is an example of a public good. If you exterminate all the mosquitos it has the characteristics of Non rivalry. – When you benefit from living in an area free of mosquito’s it doesn’t …
Readers Question: Why the fire service is a public domain and how is the fire service a merit good I think you mean why is the Fire Service a public good? A public good has 2 aspects. Non rivalry – Once consumed doesn’t reduce the amount available to others Non excludability – Once it is …