Posted by RAJA on .
A senator wants to raise tax revenues and make workers better off. A staff member proposes raising the payroll tax paid by firms and using part of the extra revenues to reduce the payroll tax paid by workers. Would this strategy achieve the senator's goal? Explain.
"raise tax revenues" -- does this mean raising tax rates? or raising more money? Those two aren't always the same thing.
Notice what's happening in the US today ... although you don't read or hear much about it in "mainstream media." Because of the healthcare law that's beginning to kick in, many businesses are not expanding (not creating new jobs), many are decreasing workers' hours so they're under 30 hours a week, and many are simply laying workers off because of all the new laws.
In addition, some of the super-rich are beginning to dump their stocks and are continuing to move bank accounts outside the US.
Lawmakers need to realize that the rich (and they are usually the ones who own or hold stock in the biggest businesses in the country) will not sit still and let the government gouge them some more. They'll take their money and go elsewhere.
Raising tax rates often creates the opposite of what the legislators intend!
This would not Correct accomplish the senator’s goals because the burden of a tax depends on the elasticity of supply and demand Correct .