If a person earned a little more, his income tax rate would be current income would be 40%. When considering whether to do a little more overtime, whether the holiday pay would be vacant or whether he would like a promotion, he might whether the effort seen to earn extra money is relative to what is left in the hand tocome. If he concludes that the effort is not worthwhile, taxation will affect his tax income. He may also be wondering if it is worth working at all, or stay out of work for a while. He can apply for a better job or care for a child in the family with a home care allowance. So How to calculate business tax? Here we go:
What is the Key Idea
The key idea is that as income taxation tightens, the taxpayer will change their conduct and, as a result, the amount of taxable income decreases. Particularly what is interesting is how much taxable income decreases as the tax rate increases. In this case, we are talking about the flexibility of taxable income. Not relevant in this review not through what mechanisms the effect arises.
- The key is how much of a person taxable income decreases. In general, it is thought that taxable income will decrease the tax rate increases as other options become more attractive. For example, the less you are willing to work overtime, the less they provide income.
- This makes leisure time more attractive than overtime. If overtime is reduced much while the tax rate increases only slightly, taxable income flexibility is high. If, on the other hand, few pay attention to tax rates, overtime decisions, the tax rate has little effect on taxable income.
The Stretchable Tax Incomes
The elasticity’s of taxable income have been assessed in previous studies. Usually reviews have ended up with rather little flexibility. Thus, only a small part of the tax tightening the increase in tax revenue is lost due to the behavioral effect. The small effect of the behavior also suggests that the tax advantage does not the loss of vitality is not very great. These estimates are average for the entire population made. In certain respects, the distribution of income and the behavioral behavior of certain specific groups the effect may be greater than for others.
- Flexibility of taxable income is a key element in tax policy planning. The small elasticity’s mean that a moderate increase in the income tax rate willsnode major public finance problems. Public debate is often exaggerated the magnitude of the effects.According to these arguments, the slight increase in the significantly reduce employment, or lead to the mass exodus of taxpayerscomma.
The research results presented above do not support this view. Especially The results do not support the fact that the reduction in income taxation would increase the tax. The level of income taxation depends on the welfare goal of society and the need for public funding. However, when making decisions, you have to be right picture of the magnitude of welfare losses caused by taxation.
