Thought Leadership

Tax and Budget Policy

Money is needed to run a country. Governments collect this money in various forms of taxation. Yet, it is important how the government collects and spends money. Tax and budgeting decisions are the most concrete way that government declares its public priorities and balances between competing values. Tax and Budget policy governs how money is earned and spent by a nation.

Tax Incentives

Taxes are a necessary evil. One way to promote economic activity in certain industries is with the help of tax breaks. For example, the home-building industry has benefited greatly with the help of a provision that allows Americans to deduct their home mortgage interest costs from their personal income taxes.  According to some experts, these tax breaks have saved property owners as much as $2.5 billion annually. The oil and gas industry also benefited thanks to tax breaks. However, many critics feel its benefits are excessive and much too costly.

Industrial and Supply Side Policies

During the 1980’s, economic policy discussion often debated two strategies. The idea of too little government led some analysts to argue that policymakers must develop a comprehensive economic development strategy for restricting the economy.  This approach was known as industrial policy, it allowed the United States to abandon certain industries in which labor costs were too high for successful competition with other nations. Nevertheless, it rescued other industries and made them competitive in new high-technology and service industries.

On the other hand advocates of supply-side economics felt that it would be more beneficial to pay more attention to policies that would promote increased production of goods.  Therefore, supply-siders have supported cutting taxes to help stimulate investment, lifting regulations in the marketplace, and eliminating other government restraints on private business initiatives.

Supply-siders claim that past government intervention in the economy relied too much on consumer demand to stimulate economic growth and imposed too many obstacles to private investment. According to supply-side advocates, only through policies that increase supplier’s incentives will jobs be created and the economy grows.

Since the Tax and Budget Policy is responsible for the overall development of the nation, it is essential for the government to come up with one that promotes economic activities and generates revenues for the country.