Question

In: Economics

Discuss US fiscal policy. Including taxes, presidential candidate tax policies, real estate taxes, sales tax and...

Discuss US fiscal policy. Including taxes, presidential candidate tax policies, real estate taxes, sales tax and value-added tax. Discuss how taxes play a role in US politics. How do these shape elections and Presidential campaigns?

Solutions

Expert Solution

The US fiscal policy is the policy used by the government to manipulate the government spending and the taxation structure so that the economy is on the path of growth with price stability and employment level in the economy. Hence, fiscal policy is used to influence the consumption and investment behavior of the households and firms. In this regard, the presidential candidates use taxation policies as an important topic in their election campaign. For example, the Republican Party candidates focus upon the reduction of taxes so that more disposable income is available to spend to the consumers and less burden will come to the government spending. Though, the Democratic Party candidates focus to reduce the tax for low income people and increase the tax for rich people to bring equality as well as increase in aggregate demand. To pursue their philosophies, the taxation system has major avenues such as real estate tax, sales tax and value added tax. The real estate tax is applied upon the real estate properties. The real estate tax varies to create incentives for the effective use of the property. So, different rates are proposed by the different government belonging to the different parties. On a similar note, sale tax is also manipulated to stimulate the sales and business activity. There is no nay federal value added tax in the USA. Rather, it is the state level taxation that is also applied upon the economic activities.
The modification in the taxation in terms of rates modification and new proposals, help the candidates to attract and make them think favorably towards their party candidates at different level of election. It helps them to win the election. Besides, the favorable proposals on taxation also help the party candidates to get donations from the different enterprises, industry associations and other groups who lobby for the change on the similar lines. It makes the tax related policy to be one of the most attractive topic of debate and a major consideration to attract the voters. It helps them win the elections as people think that one party has, the more realistic, favorable and correct plan to implement and improve the economic scenario. Hence, it shapes the election and policy planning as well.


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