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.

This would not Correct accomplish the senator’s goals because the burden of a tax depends on the elasticity of supply and demand Correct .

Probably not.

"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.

http://www.washingtontimes.com/blog/watercooler/2012/nov/8/picket-companies-plan-massive-layoffs-obamacare-be/

http://newstalk870.am/thousands-of-layoffs-pending-due-to-obamacare-many-starting-now/

http://www.cnbc.com/id/47599766

http://money.msn.com/investing/latest.aspx?post=9852691a-8797-40d9-99ba-3ab1ffb5c242

Raising tax rates often creates the opposite of what the legislators intend!

The proposal of raising the payroll tax paid by firms and using a portion of the extra revenues to reduce the payroll tax paid by workers can potentially achieve the senator's goal of both raising tax revenues and making workers better off.

By increasing the payroll tax paid by firms, the government would generate additional revenue, as firms would have to contribute more to the tax pool. This increased revenue could then be used to reduce the payroll tax burden on workers.

Reducing the payroll tax paid by workers would, in turn, increase workers' take-home pay, making them better off financially. This can help improve their overall economic well-being and potentially stimulate consumer spending, which can contribute to economic growth.

However, it is important to note that the overall impact on workers' well-being will depend on several factors. For instance, if the reduction in payroll tax for workers does not offset the increased tax burden on firms, it might not lead to a significant improvement in workers' overall financial situation.

Additionally, the effectiveness of this strategy will also depend on how firms respond to the increased payroll tax. Firms may try to offset the higher taxes by reducing wages, cutting jobs, or increasing prices, which could potentially undermine the goal of making workers better off.

Therefore, while this strategy has the potential to achieve the senator's goal, careful analysis and consideration of the potential consequences are necessary to assess its effectiveness and overall impact on tax revenues and worker well-being.

In order to determine whether the proposed strategy would achieve the senator's goal of raising tax revenues and making workers better off, we need to consider the effects of raising the payroll tax on firms and reducing it for workers.

When the payroll tax paid by firms is increased, it means that employers would need to allocate more of their resources towards paying the tax. This could potentially lead to various outcomes such as reduced profits, increased costs, or limited funds available for hiring and expanding the business. These factors might subsequently affect the overall economic growth and job opportunities.

On the other hand, if part of the extra revenues generated from the increased payroll tax are used to reduce the tax burden for workers, it could potentially benefit employees directly. By reducing the payroll tax paid by workers, they would have more disposable income, which could promote consumer spending, savings, and potentially improve their overall financial well-being.

However, it is crucial to consider several factors when evaluating the effectiveness of this strategy:

1. Elasticity of labor demand: If the labor demand is elastic, which means firms are highly responsive to changes in labor costs, the increase in payroll tax paid by firms could lead to reduced hiring or even job losses. In such a scenario, the goal of making workers better off may not be achieved, as some workers may face unemployment or reduced working hours.

2. Income distribution: Raising the payroll tax paid by firms and reducing it for workers might impact workers differently based on their income levels. If the cut in payroll tax for workers is proportional to their wages, it could potentially benefit low-income workers more than high-income workers. However, if the reduction in payroll tax is nominal and does not significantly increase workers' take-home pay, the overall impact on workers' well-being might be limited.

3. Economic efficiency: Increasing the payroll tax on firms could potentially create disincentives for businesses to invest, expand, or hire new employees. This could lead to a reduction in overall economic growth and tax revenues in the long run, counteracting the initial goal of raising tax revenues.

In conclusion, while the proposed strategy of increasing the payroll tax paid by firms and using part of the extra revenues to reduce the payroll tax paid by workers might have some potential benefits for workers, it could also have unintended consequences such as reduced employment opportunities and negative impacts on economic growth. It is important to carefully evaluate the potential effects and consider other policy options to achieve the senator's goal effectively.