Government Policies

How Government policies can be implemented

Taxation

Regressive tax is when everyone pays the same levels of tax, and there are no bands for different levels of tax. The burden of regressive taxes are on people of a lower income.

Progressive tax is where the average rate of tax rises as income rises. I.e. the proportion of your income taken in tax rises as you become richer. This

Trickle down effect-

A theory that states when income rises, so will the consumption of the richer people; meaning that there is a high demand for goods and services, so employment increases i.e. industrial revolution; however we are increasingly seeing the rich becoming richer, as their investments are becoming more financially attractive to them, for example investment in property or shares, and not consumer goods. In conclusion, although we may see an increase in jobs from high levels of consumption from richer people; leading to increased disposable income for the people providing their labour for these jobs, the rich are still benefiting at much greater margins in comparison to people of a lower income. The effectiveness of this theory is questionable, as wealth is increasingly being stored among the rich.

Although the trickle down effect isn’t explicitly a Government policy; it can be influence through the rates of tax on people of a higher income.

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