Won’t happen because it would have massive inflationary pressure which wouldn’t be a problem usually because everyone has more money. However the inflationary pressure would be immediate and the savings in people’s account would be decimated.
So if you are paying 25% combined federal and state income tax wouldn’t you rather keep that money and possibly pay 25% increased prices on imported goods. That would be discretionary as opposed to mandatory. I’ll make that trade any day of the week.
Yes that makes sense on discretionary spending of imported good. But also there's will be increase in money within the economy which will lead to higher demand for non discretionary spending which means these prices increase leading to higher inflation.
Note at some point into the future demands = supply and therefore the economy becomes balanced or in equilibrium again. How long this takes is unknown.
Also, it will discharge people who have cash savings as their savings will but much less during the initial inflationary period.
It's a simple supply/demand equation. Inflation is caused by excess amount of money supply. This is why the Reserve Bank increases interest rates to reduce the money supply.
If there is a sudden increase in money supply achieved through a huge reduction in income tax or 0% income tax, this will lead to an increase in demand but supply remains constant or stable and therefore leading to an increase in prices and therefore increase in inflation.
There are economic equations which describes the same thing but I'm trying to simplify the action of money supply.
So in essence and increase in demand --> shortage of supply and leading to inflationary increasing in prices..
A decrease in demand (caused through income rate increases. Tax increases also have the same effect) --> reduction in demand --> reduction in pricing to meet demand (deflationary pressure)
Won’t happen because it would have massive inflationary pressure which wouldn’t be a problem usually because everyone has more money. However the inflationary pressure would be immediate and the savings in people’s account would be decimated.
So if you are paying 25% combined federal and state income tax wouldn’t you rather keep that money and possibly pay 25% increased prices on imported goods. That would be discretionary as opposed to mandatory. I’ll make that trade any day of the week.
Yes that makes sense on discretionary spending of imported good. But also there's will be increase in money within the economy which will lead to higher demand for non discretionary spending which means these prices increase leading to higher inflation. Note at some point into the future demands = supply and therefore the economy becomes balanced or in equilibrium again. How long this takes is unknown. Also, it will discharge people who have cash savings as their savings will but much less during the initial inflationary period.
Inaccurate and vague.
Please elaborate without the doublespeak.
It's a simple supply/demand equation. Inflation is caused by excess amount of money supply. This is why the Reserve Bank increases interest rates to reduce the money supply. If there is a sudden increase in money supply achieved through a huge reduction in income tax or 0% income tax, this will lead to an increase in demand but supply remains constant or stable and therefore leading to an increase in prices and therefore increase in inflation. There are economic equations which describes the same thing but I'm trying to simplify the action of money supply. So in essence and increase in demand --> shortage of supply and leading to inflationary increasing in prices.. A decrease in demand (caused through income rate increases. Tax increases also have the same effect) --> reduction in demand --> reduction in pricing to meet demand (deflationary pressure)