The Importance Of Fiscal Policy

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Fiscal policy is the use of government revenue (taxes) and expenditures (spending) to monitor and influence a country 's economy. It is one of the most powerful tools that a government has in order to stabilize an economy and lead it in the proper direction. Today, the United States ' fiscal policy focuses on increasing government spending and cutting taxes, especially for the middle and lower classes. With the presidential election occurring in the next week, both candidates have expressed a desire to increase government spending and cut taxes. While Donald Trump wants to cut taxes for the higher class, Hillary Clinton wants to raise taxes for people making over $250,000. If I were able to dictate the fiscal policy of the country, I would …show more content…
Demographic trends and expansion of the social safety net imply a constant growth in transfers, and rising deficits are likely in the near future. Before the
Great Recession, revenues averaged about 17.5 percent of the GDP. After the sequence of fiscal action that was implemented in response to the recession, government spending reached a postwar record of 24.4 percent of the GDP in 2009. If revenues remained the same with this amount of government spending, there would be a 6.9 percent deficit, the largest deficit since at least 1970. This is just one example that demonstrates the significance of fiscal policy, for it can drastically the affect economy in positive and negative
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It is the way in which a government gathers revenue to spend. The Great Recession also had a negative impact on government revenue as taxes were cut tremendously. From the end of 2007 to 2009, real tax receipts had fallen by over 15 percent and in the third quarter of 2009, tax receipts only financed 62 percent, the lowest shares since World War II. In 2012, the U.S. government raised 24 percent of the GDP in tax revenue, a percentage lower than many countries, including Japan,
Canada, France, and Sweden. So what source of tax revenue has raised the most amount of money? Historically, personal income taxes have raised the most revenue. In 2013, 35 percent of the revenue raised came from personal income taxes, 33 percent from other taxes, 24 percent from social insurance taxes, and 8 percent from corporate profit taxes. Taxes are the main source in which the government raises funds for government spending, and it is important to maintain taxation levels at a moderate percentage, as too many taxes can destabilize the economy and too little inhibit the government 's ability to spend in order to provide goods and services to the

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