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Macroeconomics: Unit 4, Taxation, and the Effect of Taxes on the Economy 0 Views
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Transcript
- 00:01
no macro economics Allah shmoop taxation Great word Well Ben
- 00:08
E Franklin once said that the only two things in
- 00:11
life that are certain are death and taxes And now
- 00:15
that they have gene editing while the only thing left
- 00:18
is taxes you know for certain all right well bleak
Full Transcript
- 00:22
Yes but Ben Franklin lived in an age when one
- 00:25
out of every two people died of syphilis So you
- 00:29
know it makes sense anyway Ben's niece Sally Franklin it's
- 00:32
his niece buys a fruity tooty ice cream She pays
- 00:36
a sales tax of that value added tax or a
- 00:40
sales tax When Mr and Mrs Quincy Adams buy a
- 00:43
house together and live on it for around while 30
- 00:46
years they pay property tax when you get that sweet
- 00:50
sweated for paycheck and noticed that a huge amount of
- 00:54
it was chopped off while you perhaps bitterly realised that
- 00:58
you do in fact pay income tax Federal state sometimes
- 01:04
city a looking at you their Manhattan well authorities in
- 01:07
most cases the government our kind of financial little parasites
- 01:12
Sorry guys Just keeping it real They don't actually produce
- 01:15
anything right like unless you called governing thing so they
- 01:20
exist on the taxes and hard work of the people
- 01:25
they want to get paid for their you know governing
- 01:28
work with no reason to be sensitive to the amount
- 01:31
of money they're spending or how efficient there spend is
- 01:35
or whether or not the value of that spend lives
- 01:38
beyond well the next election cycle Right Well anyway taxes
- 01:42
are the financial gasoline in the engine that the government
- 01:45
likes to run like that Think of it as the
- 01:48
blood that parasites sucked out of your leg when they
- 01:51
latch on And not all taxes air bad or wasted
- 01:55
of course other than the salaries of Congress people thie
- 01:58
taxes collected from the government well governed by moving cash
- 02:03
from the haves to the have nots through programs like
- 02:07
while Social Security is one of a Medicare Medicaid and
- 02:10
another some taxes are unavoidable Can't spends saying you know
- 02:14
death and taxes But not all taxes are strictly necessary
- 02:19
Sometimes people or companies we'll get tax as a consequence
- 02:23
for doing something bad Example Both companies polluting into a
- 02:26
local river the government may impose a tax to make
- 02:28
up for the social badness that the polluting is causing
- 02:32
So this tax creates all kinds of problems for the
- 02:35
company doing the polluting Why Because it competes internationally and
- 02:40
lots of second and Third World countries really don't care
- 02:43
if they pollute If the whole country is on the
- 02:45
doorstep of starvation why would they care about cancer causing
- 02:49
agents in the water that will only begin to show
- 02:52
up two or three decades from now So this tax
- 02:55
is kind of a dangerous weapon certainly in the Western
- 02:58
world if it's charged against us and Western countries who
- 03:02
are quote first world unquote who do care about you
- 03:06
know three headed fish and you know children having problems
- 03:10
from drinking the water downstream Well then how can those
- 03:13
Western companies compete against Somalia Why do they not care
- 03:19
Because their government is highly corrupt and essentially gates The
- 03:22
resource is that should be available to the common person
- 03:25
in the country So the common people aren't worried about
- 03:29
living to celebrate their 80th birthday there just helping to
- 03:33
survive to next week Okay moving on taxing pollution Well
- 03:37
assuming that the world was globally on the same page
- 03:40
would either force the polluting companies to make ICO friendly
- 03:44
decisions and raised prices Eventually making consumers pay for the
- 03:49
non pollution or well taxing pollution may force people toe
- 03:54
exit the business altogether And well then they'd buy the
- 03:57
supplies from foreign countries who will do more damage to
- 04:01
their people in the long run because well if they
- 04:03
don't those countries don't have a short run right The
- 04:06
people all starve and die and well what do we
- 04:09
do about this Yeah So things are never as simple
- 04:12
as they seem in the New York Times Okay so
- 04:14
taxation policy becomes a political football And while we know
- 04:18
taxes affect the economy we aren't able to perfectly manipulate
- 04:22
the economy's performance with taxes taxing bad behavior and using
- 04:26
proceeds to fix the things wrought by that bad behavior
- 04:30
Right Taxes don't save everything They just kind of like
- 04:34
a meld politics in one direction or another Well the
- 04:37
whole notion of resource reallocation is dictated by popularly elected
- 04:43
politicians leave a bad taste And while pretty much everyone's
- 04:47
mouths the hardworking educated financially successful compatriots I feel that
- 04:52
too much of their hard earned money is being allocated
- 04:56
to the lazy the Slava nly the seven deadly sinners
- 05:00
right while the poor feel that the wealthy have just
- 05:03
one too many private jets so nobody's ever happy Alright
- 05:07
trick is to keep everybody equally unhappy equally unhappy Yeah
- 05:12
so that we don't revisit that whole You know Les
- 05:15
mis thing where you hear the people sing and crowds
- 05:18
play soccer with former politicians Heads as effective as that
- 05:22
kind of revolution may in fact be okay Another quick
- 05:25
example Governments can use tax policy to affect the livelihood
- 05:29
of their people Weapon they deploy is known as fiscal
- 05:33
policy and its goal is to stimulate or slow down
- 05:36
the economy So when the government cuts income taxes people
- 05:39
generally have more disposable income to spend or save right
- 05:43
You were paying an average total tax of 27% on
- 05:46
the 100 grand of taxable income that you earned or
- 05:48
27 grand total Then tax there cut to given average
- 05:52
corporate tax of 22% Suddenly you keep an extra five
- 05:55
grand a year after taxes Wow that's a huge delta
- 05:58
in safe Think about five grand 400 bucks and change
- 06:02
a month free that you didn't have before What would
- 06:04
you do with it If the government wants to close
- 06:07
a recessionary gap well they or it can spend some
- 06:12
money that it collected from taxes And we'll have that
- 06:15
money percolate around the economy to scale up and hopefully
- 06:18
match the gap meaning that if GDP is hovering around
- 06:22
well 0.3% growth with fear of AH guy jumping into
- 06:27
Cold River shrinkage as GDP goes negative and into recession
- 06:31
territory which everyone hates for one reason or another Well
- 06:35
what do we do What do we do Well then
- 06:36
the government can quote spend its way out of trouble
- 06:40
unquote by ordering a bunch of road repair and the
- 06:43
new army tanks and water dams and piping and sewer
- 06:48
thing is and whatever other things that would spend money
- 06:51
on so that businesses when then I need to hire
- 06:54
workers sell stuff to the government and the world returns
- 06:57
to inflation fear rather than you know Coldwater Shrinkage On
- 07:01
the other hand governments can promote spending by giving workers
- 07:04
Mohr of their income to spend by cutting taxes hoping
- 07:08
with the workers will then provide the liquidity or the
- 07:10
economic stimulus in upgrading washing machines cars computers and buying
- 07:14
way better wigs Okay so how should the taxes collected
- 07:19
change to get this desired stable ish growth the economy
- 07:23
result that everyone seems to want well the first is
- 07:26
that they have to think about the multiplier effect Yeah
- 07:29
that's what it is Remember that five grand in sudden
- 07:32
savings via the big tax cut Well it has a
- 07:34
huge effect That guy now spends the five grand on
- 07:38
whatever a party is a grand The bartender bills 100
- 07:42
bucks that bartender spends the $100 on whatever's and whatever
- 07:47
spend on whatever you say have a positively vicious cycle
- 07:50
or a virtuous one depending on how you look at
- 07:53
it So how do you determine proper spending or tax
- 07:56
cutting slash levying levels Will the government again uses the
- 08:00
average MPs or marginal propensity to save to get a
- 08:04
rough estimate of the multiplier this time calculating it as
- 08:07
one over M P s like that or one over
- 08:12
one minus mpc since MPs is the same as one
- 08:16
minus MPC magic So if the average MPs is 10.1
- 08:21
and the tax multiplier is 10 so what effect does
- 08:25
this have on the economy when the government increases spending
- 08:29
GDP also increases and vice versa But when the government
- 08:32
increases taxes well disposable income decreases so GDP usually also
- 08:39
decreases The negative sign just shows that changes in taxation
- 08:43
and GDP happened in opposite directions right If a government
- 08:47
wants to close a recessionary gap of saying a $50,000,000,000
- 08:51
with MPs of 0.1 well the government could cut taxes
- 08:55
by a total of $5,000,000,000 just closed the gap Okay
- 09:00
quick and dirty recap Taxation is when the government takes
- 09:04
revenue from people and businesses Taxes are necessary to help
- 09:08
the government run And those taxes support lots of things
- 09:12
like social welfare programs in the military and pretty much
- 09:15
just everything the government does well Some taxes like sales
- 09:19
tax don't affect everyday life in a huge way on
- 09:21
their own Other taxes like income tax well can change
- 09:25
Everything is suddenly If the government raises or lowers taxes
- 09:29
it can completely change how the economy performs There are
- 09:33
many different theories and practices when it comes to taxation
- 09:36
Because no two economic scenarios are exactly alike There's no
- 09:40
way to know for certain which tax program's gonna have
- 09:42
the best effect And this is why there are huge
- 09:46
debates about taxation on the end You Khun Bet government
- 09:50
will not spend those dollars that you worked hard to 00:09:53.0 --> [endTime] earn efficiently
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