The Effects of Taxation on Savings

#YOUCANLEARNECONOMICS #ECONOMICS The effects of taxation on the volume and composition of private saving has traditionally been considered one of the central questions in public finance. This is hardly surprising. From a policy point of view one can point to a series of arguments for the importance of the problem. If alternative tax systems can lead to different rates of private saving, then the choice between them should take into account the short-run effects on employment and inflation, the medium-term effects on the rate of growth, and the long-term effect on the capital intensity of the economy. These are basically issues of the efficiency of resource allocation, but distributional policy is also involved. A tax policy designed to encourage saving may transfer income from "workers" to "capitalists" and from the present to future generations. Evidently, there are all sorts of tradeoffs to consider in policy design. Although it is clear that much of the interest in this particular question is derived from a concern with policy problems, it is important to emphasize the conceptual distinction between positive and normative issues. Thus the question of whether an expenditure tax will lead to a higher or lower level of private saving than an equivalent income tax is a positive one. Whether the answer is one or the other does not in itself have any implications for tax policy. It is only when we introduce criteria for social welfare or efficiency that we can begin to consider the normative question of the desirability of an expenditure tax. In principle, savings decisions can be made by consumers, firms and governments. Subscribe me @ youtube.com/c/EZClassesfaghsa Like me on Facebook @ www.facebook.com/faghsa/ Follow me on Twitter @ twitter.com/?lang=en Mail ID: [email protected]

• #education
• #the_effects_of_taxation_on_savings
• #effect_of_taxation_on_economy
• #effects_of_tax
• #effects_of_taxation
• #effects_of_taxation_on_economy
• #effects_of_taxation_on_investment