Question

Tax deductions, credits and so on have been used to encourage home ownership, giving to charity, taking care of you and going to work. Taxes have been used to discourage smoking, drinking and all sorts of enjoyable activities.

You are to look at the impact of using incentives to encourage/discourage individual behavior. You are to discuss whether this is something tax should be doing. You are also to discuss whether any or many of these programs should be discontinued. Would ending these programs or some of them be a way of raising taxes “without raising taxes?

Answer 1

The tax authorities uses the tax deductions, credit and exemptions on all kinds activities which will increase investment in the nation building like home ownership, charity and medical taking care activities.

On the other hand, the imposition of the higher taxes will discourage the individuals to expense heavily on smoking, drinking and other anti-social activities. The business houses are provided exemptions in taxes if expenses are made towards the employees care taking activities and on discouraging the anti-social activities and encouraging the society up-gradation.

If the tax authorities stops all these tax deductions, credit and exemptions, the investment on the nation building will reduce and employees caring activities at business will drop down. The home industry will be detained of growth as no investment is being made in it.

So, none of these development programs and tax deductions and exemptions on them should not be stopped, but encouraged to extend further tax deductions on many more development activities.

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