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Fiscal Policy Neo

1) Great Britain discussed moving from labor income taxes to property and capital taxes, noting that wealth and inheritance taxes tend to be progressive while real estate taxes can be regressive. 2) The United States discussed increasing total tax revenues and changing the tax mix while keeping revenues constant, such as moving from income to consumption taxes which could raise GDP by reducing disincentives to work and save. 3) Japan used expansionary fiscal policy in the early 1990s through tax cuts and spending which boosted growth, with tax cuts found to have a multiplier over 25% higher than spending at a four year horizon.

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60 views2 pages

Fiscal Policy Neo

1) Great Britain discussed moving from labor income taxes to property and capital taxes, noting that wealth and inheritance taxes tend to be progressive while real estate taxes can be regressive. 2) The United States discussed increasing total tax revenues and changing the tax mix while keeping revenues constant, such as moving from income to consumption taxes which could raise GDP by reducing disincentives to work and save. 3) Japan used expansionary fiscal policy in the early 1990s through tax cuts and spending which boosted growth, with tax cuts found to have a multiplier over 25% higher than spending at a four year horizon.

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Anonymous BBs1xxk96V
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NEO NATHANIEL M.

LIWANAG
9-MAUNAWAIN

GREAT BRITAIN UNITED STATES OF AMERICA JAPAN

Moving from labor income to Increasing total tax revenues Japan utilized an expansionary
property and capital taxes: ● The impact of taxes on fiscal policy during the early
1) Wealth, inheritance taxes, income distribution depends 1990s, in the form of tax cuts
and capital taxes. on the level of taxation, the or of public works spending. It
- Wealth and inheritance tax had significant stimulative
taxes tend to be progressive. mix, and the use of tax effects. Using a new method
- The distributive impact revenues; but if tax systems of computing policy
depends on the relative are progressive overall, multipliers from structural
progressivity of income versus equality is VARs, it was calculated that
wealth and inheritance tax. enhanced. the multiplier on tax cuts is
2) Real estate taxes: ● Taxes dampen incentives to about 25% higher at a four-
● Real estate taxes are often work, save, and invest, and year horizon than that on
less progressive than personal are thus detrimental to public works spending,
income tax and can even be growth; though both are well in excess
regressive. but some taxes have a less of one.
● Property taxes are among adverse effect than others.
the least harmful for growth. A historical decomposition
Moving from income to Changing the tax mix while reveals that Japanese fiscal
property taxes tends to keeping total tax revenues policy was contractionary
improve incentives to work constant over much of the 1990s, and a
and invest, and thus raise Moving from personal income significant proportion of the
output at tax to consumption taxes: variation in growth can be
least in the short- and ● Personal income tax tends attributed to fiscal policy
medium-term. to be progressive, while shocks; accordingly, most of
consumption tax is regressive. the run-up in public debt is
Cutting tax expenditures and ● Personal income tax attributable to declining tax
marginal tax rates: reduces work and saving revenues due to the
● Most tax expenditures incentives. A shift from direct recession.
benefit high-income groups to indirect
(in-work tax credits and other taxes would raise GDP per
tax capita.
expenditures targeted at low-
income groups are the Increasing the progressivity of
exception). Cutting tax taxes (but revenue-neutral)
expenditure would narrow Personal income tax:
the distribution of disposable In-work tax credits narrow the
income. income distribution and raise
● Cutting marginal rates incentives to work.
improves incentives to work, 1) Increase in top rates.
save and invest, and thus lifts ● On the other hand, higher
the top rates may reduce working
GDP per capita hours and productivity by
undermining incentives to
work, invest, and innovate.
2) The above measure
combined with expanded
earned income tax credit
schemes or
tax-free allowances.
● The GDP per capita impact
is thus ambiguous.

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