Fundamentals of Macroeconomics Essay
Fundamentals of MacroeconomicsJeanette LeBlancECO/372May 25, 2015Laura Klosk-GazzaleFundamentals of MacroeconomicsAll three activities affect the economic and are connected to each other in different ways. Groceries help the farmer to increase their income by selling to Supermarkets. Supermarkets increase their earnings by selling the products to individuals. The individual feeds their families and work for the supermarket or the farmer that increases the income of the family. The government gain by the taxes they charge to all three. Purchasing GroceriesEvery individual work to earn an income to buys groceries, clothing, household supplies or a vehicle. As someone earns money, they must pay taxes which are deducted from our paychecks and when purchasing ideas named above they pay taxes on them also. So here is the cycle of the flow of money, individuals to business and government, businesses paying their employees, to the business paying to the government. Thus the more an individual makes, the more taxes they paid, the more groceries and other ideas they can buy, which help businesses growth. Massive layoffs of Employees When the economic start on a decline, one of the first things to happen is layoffs, which will cause unemployment, with unemployment individual income drops, the taxes they also pay drops. Individual may require getting government assistant such as food stamp, Medicaid or welfare, which affects the funds that we paid from collected taxes. Less food and other ideas can be bought, which means fewer taxes paid, less or cheaper food is purchased. Thus, less money spend will cause the economic to decline more, a vicious cycle.
Decrease in Taxes A decrease in taxes can have a negative and positive effect on the economic. Fewer taxes means more income for an individual and businesses, but for the government fewer taxes means less income. Fewer taxes can affect education, roads, and government assistant programs. Decrease in taxes will help businesses two fold, paying less when they purchase inventory, this well helps increase their profit and they can pass the savings on to their customers. It can also allow businesses to expand or make improvements, or hire new employees this will increase the flow of income into the economic. Individual well have the income to buy more and better ideas, such as food, clothing and cars. Current Event In an attempt to increase revenue, President Obama released his 2015 fiscal year budget, increasing revenue by $1.759 trillion over ten years. (Lundeen, Andrew, Pomerleau, Kyle, 2014) To the layperson, this is too much information to understand, so here is a basic description of what is proposed. Individual taxpayersExpand the child tax credit and EITCDoubling the current credits Making credit available for taxpayers who earn $15,600 per yearAlter retirement plans and create auto-enrollment IRA programTo pay for these expansions, raise taxes on high-income earners, such as a cap on value of itemized deductionsNew taxes on high-income earnersLimit to the value of itemized deductionsBuffet Rule or the Fair Share Tax, 30% minimum tax on high incomeBusinessesSmall business 179 deduction: full expensing of capital investmentElimination of capital gain taxation on investment on small business stockS Corporations subject to self-employment taxInternational Tax SystemIncrease taxes for businesses operating on an international basisAdditional taxes placed on banks imposed on bank liabilities, the repeal of LIFO accounting rules, tax credits for Cellulosic Biofuel and multiple tax provisions for green energy.