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main income for the state, funding public expenditure and other items,
tangibly expressing the common efforts of the community.
Taxes are good ways for financing the costs of public goods
Ap lerner-advocated- (ss 1st para)
An automatic increase of tax revenue generated by a larger tax base is
welcomed to the public balance, reducing the deficit or even producing a
surplus.
Implementation of various socio-economic development projects
Govt set up works only through public funding
Govt roles and need for money.
Gdp/economic growth
Linked to GDP dynamics as it is, the tax revenue is pro-cyclical
Price stability contributes to achieving high levels of economic activity and employment by
improving the transparency of the price mechanism. Under price stability people can recognise
changes in relative prices (i.e. prices between different goods), without being confused by
changes in the overall price level. This allows them to make well-informed consumption and
investment decisions and to allocate resources more efficiently;
reducing inflation risk premia in interest rates (i.e. compensation creditors ask for the risks
associated with holding nominal assets). This reduces real interest rates and increases incentives
to invest;
avoiding unproductive activities to hedge against the negative impact of inflation or deflation;
reducing distortions of inflation or deflation, which can exacerbate the distortionary impact on
economic behaviour of tax and social security systems;
preventing an arbitrary redistribution of wealth and income as a result of unexpected
inflation or deflation
3 ways- (i) effects on the ability to work, save and invest (ii) effects on the will to work,
save and invest (iii) effects on the allocation of resources
Stimulating investment
The most effective stimulus proposal would maximize its “bang for the buck.” That is, it would
direct as much of the tax cuts as possible to stimulating new consumer spending and/or new
business investment in the short run;
Temporary rebates to individuals and temporary business subsidies for new investment fit these
principles.
Structure any business tax incentives to encourage new investment, not to provide a windfall
for previous investment. This includes temporary provisions to provide accelerated
depreciation, expensing, or tax credits for new investments in the near future.
Design any household tax reductions to maximize effect on demand. Tax cuts should therefore
be focused on low- and middle-income households who tend to have a higher propensity to
spend out of their income than do high-income households. Timing any new tax cut for
households to coincide with the holiday season may be an effective way to encourage it to be
spent
More investment-more money-more demand-more production-more employment-more
income-more gdp=== viscious cycle.