Question

• What is the relationship between taxes and Investments strategy?

Answer 1

Relationship between taxes and investment strategy :-

There is an inverse relation between taxes and investment strategies. This can easily be known through income on tax on investment decisions. The taxes we pay on our investments can reduce the amount of money we actually make from the given investment.

For example- If we invest in a stock and make 15% on our money, we may be taxed on our gain or profit which finally leads to decrease the amount.

Tax rate cut may encourage individuals to work, save and invest but if the tax cuts are not financed by immediate spending cuts, they will also result in an increased federal budget deficit which in the long run will reduce national saving and raise interest rates.

An increase in the investment tax credit or reduction in corporate income tax rates will increase investment and shifts the aggregate demand curve to the right. Investment also affects the long run aggregate supply curve as the change in capital stock changes the potential level of real GDP.