A increase in income tax Essay Example | Topics and Well Written Essays - 250 words

A increase in income tax - Essay ExampleAs explained above if consumers cut back, the suppliers will reduce production eon laying off workers, and then consumers will have even less money to spend in which case the pass will repeat and thusly begins a recession/depression like sequence.Consumers lose the most from this in the long bourn as explained, purchasing power will continue to drift off and some workers will eventually lose their jobs which can send more shockwaves through the economy.Example In the housing bust, consumers lost their jobs in the recession and were non able to pay for mortgages, thus defaulting. Banks then reduced their lending and consumers continued to reduce spending. Due to this suppliers had to cut their supply and more workers had to be made redundant. This round of drinks continued and spread throughout not only the United States but the world as banks defaulted on their debt.3) If the government is attempting to increase government revenue an op tion is to decrease the tax rate to a maximized level where businesses and consumers would want to spend more and thus cause more revenue in the long term and the government would be receiving more revenue than at the previous tax rate.4) A tax rate increase definitely affects the GDP and GNP collect to the loss in production the aforementioned cycles would create. In the short run the tax increase doesnt affect the GDP and GNP but in the long term Consumers would spend less and thus suppliers would produce less and lay off workers, and consumers would spend even less creating a vicious cycle that causes a