# Tag Info

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The Pigovian taxes are non-distortionary. For example imagine situation where government optimal spending is 100e and before Pigovian tax all 100e was raised through income tax which creates distortions on Labour market. Let’s say that after imposing Pigovian tax government gets additional 30e. Now since government needs only 100e for its optimal spending it ...

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Because Fed or any central bank cannot fund 100% of a budget without any adverse effect. I do not know where you heard such argument but it is blatantly false. First, it is virtually unanimously agreed by top policy economists that government cannot fund arbitrary amount of real spending (i.e. spending on real goods and services). This question was actually ...

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While many folks treat reductions in government revenue as equivalent to spending, they’re not actually the same thing. Tax cuts don’t “cost” anything. Tax cuts represent less money coming in, while government spending (such as repayment of student loans) represent more money going out. So your first thought when seeing the two things treated as if they were ...

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I don't see how the government taking X% of a business's profits is stopping the business from increasing prices (or is this just the penalty in the enforcement clause?), so I am going ignore that part. What you are describing is essentially setting prices, determining what prices a business can and cannot set. (If you merely prohibited passing on costs, ...

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Doesn't the second para. beneath contradict itself? Don't the boldened words contradict each other? No, not necessarily. English is high context language and the passage above is a bit ambiguous but there is no necessary contradiction here. Despite the higher returns that they earned, investors in the index fund were actually subjected to lower taxes, ...

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In microeconomics you can analyze tax incidence on supply demand graph. If you levy tax on consumers this will shift demand curve to the right. However, this does not mean that whole tax burden rests with consumers. The tax drives a wedge between the price that consumers pays and the price that consumers receive. The whole tax burden is the triangle ABC ...

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First, countries are not obliged to take into account science when drafting laws, so on fundamental level answer is that bitcoin is currency because US government decided that it is a currency regardless of what science has to say on the matter. US government could declare that, for the purposes of deciding your tax liability, alcohol or jeans counts as ...

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When solving this problem, it is important to notice that whenever you have a tax, there will be a difference between the price that the buyers pay and the price that the sellers will receive. Let $p_D$ be the price that the buyers pay and let $p_S$ be the price that the sellers receive. The price $p_D$ is the one that is relevant for the buyers, so it ...

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The purpose of some taxes is not only to finance government expenditure. Taxes are often partly to raise revenue and partly for other purposes, which include: To change the distribution of post-tax income (relative to what it would be if everyone were taxed at the same rate, regardless of their income). The US, like many countries, has what is known as a ...

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No there are several flaws in your argument: Starting with the most obvious problem. Just because something will be eventually owned by someone does not mean it is correct to say that the thing is owned by that entity already. This is equivalent of stating: "My house will be once inherited by my posterity so I don't own it but they do." This is ...

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The other answers already provided some intuition so I will try to be slightly more technical (although not so that a non-economist would not be able to follow). tl;dr: Government cannot prevent passing tax burden just by controlling prices (at best it can mitigate it and even that at the expense of workers). Generally to prevent the passing of the burden it ...

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You have to make sure you use the same source of tax data for a meaningful comparison because it matters what is included in that total tax revenue and what isn't. 1muflon1 suggested using OECD data which at least on that page doesn't have Argentina. The IMF data available through World Bank does have it, but my point is that if you compare the two graphs ...

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I am not sure how you calculated the tax revenue in relation to GDP, but one measure would be tax revenue as % of GDP. This is quite common measure of how heavy the taxation is because it tells you what percentage of total output produced by country is collected by government. OECD provides data on this measure here. However, it can always happen that even ...

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In this equation: GDP = C + I + G + NX Taxes come from a combination of C+I but are offset by an increase in G. Any government taxation which is not spent is an investment, so remains part of I.

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This might be a basic answer not befitting Stack Exchange (but it's a basic question): Everyone does. You want to buy things for a price as low as possible. You want to sell things for a price as high as possible (you probably only sell labour, unless you run a business). Those two pressures find a balance at some particular price, and that is the price. ...

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In US for most products government does not set prices (although there can be exceptions). People are free to set whatever prices they want, but in the end prices are set by market. In a perfectly competitive market if a firm sets price higher than market price nobody will want to buy goods from you and since in competitive market the prices are already ...

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Luxury goods tend to be Veblen goods, so reducing taxes on them doesn't make them more attractive. They also tend to be goods whose value is mainly based on scarcity, so increasing demand doesn't increase the amount supply, it just increases the equilibrium price. If diamonds were cheaper, would there be significantly more diamond jobs? There's the ...

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