Do all these taxes and licenses reduce our disposable income? Why do we sacrifice and pay these taxes? What are the ways that government helps us?
TAXES
Taxes are any governmental action that reduces the real income of wage-earners as well as non-working Americans. The action can also reduce the profit of business. Taxes act as a leakage from the GDP – Income Stream and will reduce both income and GDP over time.
- Think of taxes….
- Did you buy gas on the way to school? Did it include a tax?
- When you purchase clothing at the mall, how much is the tax?
- Driver’s License? Fishing License? Hunting License?
- Tax on Concert Ticket?
- Tax on Airline Ticket?
- Are taxes withheld from your paycheck? Income, FICA and state or local taxes
- Paying bridge tolls?
- Taxes on personal or real property?
- Tax on new tires? Alcohol? Cigarettes?
- Imports with tariffs?
- Do all these taxes and licenses reduce our disposable income?
- Why do we sacrifice and pay these taxes?
- What are the ways that government helps us?
Disposable Income: The amount of money that an individual spends on consumption and savings after income gets deducted in paying taxes and license fees is what is called as Disposable income or disposable personal income (DPI)
To calculate disposable income certain parameters are taken in considerations such as Discretionary income, personal savings,marginal propensity to consume and marginal propensity to save.
Discretionary income is the the income left after deducting all the necessary expenses spend by consumers from disposable income-that includes any mortgage or rent payment, payment on health insurance, food consumption and transportation.
Marginal propensity: It is the percentage of income that is either consumed or saved on the additional income earned by the consumer.
Therefore it can be said that disposable income is the income received by consumers post tax and license fee deductions.Hence taxes and license fees do not affect the disposable income of the consumers.
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