Induced Taxes

Induced taxes are taxes meant to induce (and seduce) consumers one way (spend if the economy is down) or the other (save if the economy is a-okay).

Induced taxes are one of many tools in the fiscal policy toolkit that governments can use to temper the economy. As GDP rises, so do taxes. After all, we want to make sure dollars are tied to value, not just to inflation. As GDP falls, so do taxes, in an attempt to get consumers to spend to boost GDP.