Taxation and Price Control on the Economy

Topics: Tax, Supply and demand, Value added tax Pages: 3 (1005 words) Published: June 20, 2009

Taxation and Price Control on the Economy
March 22, 2009

Taxation, a system of raising money to back our government, in which all governments require payments of money-taxes-from people. The government use tax money to pay for expenses that are well needed such as: the service of America soldiers, police officers service, hospitals and the list go on. Without taxes to fund its endeavors, the government could not exist. Is the tax levied (imposed) on the producers or consumers?

Every walk of life has to face the music of taxation at one level or another. Taxes are used for many reasons such as stimulating the economy to governing spending. According to Johnson (2005) tax levy was used as a form of governing particular behaviors. Taxation based upon the wealth or a particular sect of people in a higher financial category was instituted as a way to generate finances to run the government and often to aid the government in day to day business ventures. In the current financial economy direct taxes such as: income tax, real property tax, business licenses are some of the required supplements to taxation. Indirect taxes such as: general sales taxes on groceries, marriage licenses and auto purchases become the revenue needed to sustain governmental functions while encouraging the usage or non-usage of a product or services. Both the producers and consumers are affected by the usage of tax levy principles. How does the tax affect supply or demand?

Taxation affects everyone including the supply and demand chain of production. What is supply? Supply is ones ability to provide a product or service to another with a variety of prices, quantity and times that equally dependent upon the demand for service. Without a consistent supply of products and services, business and homes around the globe would fail. Taxation affects supply through the mechanism of growth. What is demand? In the respect of...
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