Question

Why? Congress often reduces taxes on middle- and low-income taxpayers with the expectation that consumers will spend most of that money and help create more economic growth. Is this idea good or not, and why?

4. Some college students earn money that is paid to them in cash and then do not include this as income when they file their tax returns. What are the pros and cons of this practice?

Answer 1

Answer(1): Yes, This is true. Congress often reduces taxes on upper-middle, middle and lower middle taxpayers so that their propensity to consume may increase. These are the income groups that generate demand for any product or service. Few companies make products for Niche market while many companies make products and offer services to the lower and middle income group that generate most of the revenues of the companies. Demand for goods and services increase the production in the country and when production increases, employment also increases, people earn more income and timely pay income tax to Government. This is a whole cycle.

This is a good idea for a growth and stability in the country, if there is high inflation in the country then congress can increase the taxes and interest rates.

Answer(2): Students who come under tax category must pay the income tax to Government. Its pros and cons are as following:

Pros- When students pay income tax, Government gets revenue that it spends on the welfare of society only. Students also are saved from tax evasions or tax avoidance.

Cons- Tax evasion and tax avoidance are illegal activities. If student is caught not paying the tax then there may be penalties.