Market without and with taxes

What Are Taxes?

Taxes are forced contributions imposed by a government agency on individuals or corporations,

whether municipal, regional, or national. Tax revenues support government functions such as public
works and services like roads and schools, as well as programs like Social Security and Medicare.

In economics, taxes are levied on whoever bears the cost of the tax, whether it is the taxing entity,
such as a business, or the end users of the business's products. Payroll taxes, federal and state
income taxes, and sales taxes are all factors to consider from an accounting standpoint.

Market without taxes

The free market is a supply-and-demand economic system with little or no government intervention.
It is a summary of all voluntary interactions that occur in a certain economic setting. Individuals make
economic decisions in free markets, which are characterized by a spontaneous and decentralized
order of arrangements. A country's free market economy can range from very vast to completely
illegal, depending on its political and legal norms.

Benefits of taxes

The purpose of taxes is to provide the government with funds for spending without inflation. Taxes
are used by the government for a variety of purposes, some of which are:

Funding of public infrastructure

Development and welfare projects

Defense expenditure

Scientific research

Public insurance

Salaries of state and government employees

Operation of the government

Public transportation

Unemployment benefits

Pension schemes

Law enforcement

Public health

Public education

Public utilities such as water, energy, and waste management systems

Tax is levied on a wide range of income stemming from salary, profits from business, property rental,
etc. There are also wealth taxes, sales taxes, property taxes, payroll taxes, value-added taxes, service
taxes, etc.
Advantages of Taxes

 Money to fund public infrastructure projects

Tax revenue can be used to fund a number of vital public infrastructure projects, which is a
significant benefit of taxation.
For example, our roads must be fixed on a regular basis, among other things.
If mandatory taxes were not in place, the government would not be able to fund those
improvements, and the general quality of our public infrastructure would suffer.

 Better public education

The money collected in taxes by a government can also be used to strengthen the entire
public education system.
Many schools are still relatively rudimentary and lack basic resources needed to effectively
educate schoolchildren.
As a result, tax dollars can be used to provide the required tools for children to learn quickly
and effectively.
This is especially true when it comes to learning with digital media, because digitization will
be one of the century's major problems, and we must educate our children for it in order to
ensure that they have decent career chances.

 Childcare facilities

Tax dollars are frequently utilized to subsidize childcare centers.

It is critical, especially in families where both parents work demanding occupations, that they
be able to bring their children to childcare so that they can work long hours in a concentrated
manner.
Parents would have to pay for private daycare if there were no tax-funded childcare facilities,
which can be highly expensive and only accessible to the upper class.
As a result of tax revenue, we can provide childcare to low and middle-income families at a
reasonable cost.

 Improvements in public transport

Another benefit of taxes is that they can be used to fund public transit improvements.
Although public transportation in some large cities is already pretty good and reliable, many
cities and regions have a poor public transportation system that people cannot rely on to get
to work or other key destinations.
As a result, improving our entire public transportation networks is critical, especially since we
must address the global warming problem in some way, and public transportation can help
cut greenhouse gas emissions to some level.
Other Advantages:

Disadvantages of Taxes:

 People have less money to spend

Taxes have a number of advantages, as we have shown.

However, levying taxes on the general population comes with its own set of issues.
One downside of taxes is that they cause people to have less money in their wallets because
a portion of their income must be spent on taxes, reducing their disposable income.
As a result, consumers will be able to consume less, resulting in a slower pace of national
GDP growth.
 Less overall savings in bank accounts

Taxes reduce people's disposable income, which means they have less money in their bank accounts.

Rent, food, gas, and water, among other expenses, are borne by all of us.

These fees cannot be greatly reduced, and if there isn't much money left over after these essential
expenses, people cannot overdraw their bank accounts.

As a result, if your automobile needs to be repaired or you need money for other unexpected
expenses, you may face major troubles.

As a result, taxes may lead to a situation in which people do not save enough money to be able to
use in an emergency.

 Investments for the future might suffer

High tax rates may also reduce the amount of money people invest for their future.
For example, if you deduct a considerable portion of your salary for tax purposes, you will
have significantly less money available for your daily needs.
As a result, there's a good possibility you won't put enough money into retirement funds or
other investments that will benefit you in the future.
This could lead to a situation where many people, especially those who worked in low-wage
occupations and were unable to save and invest enough money, face destitution once they
retire.

 Taxes may discourage people to work hard

Another problem with taxes is that they may discourage people from working long hours in
order to make a good income.
For instance, if you have to pay significantly higher tax rates for high incomes, chances are
that many people will lose the motivation to work hard since they know that a big fraction of
their income will be deducted for tax purposes.
Thus, if taxes become too high, they might also result in flawed working incentives and
governments should make sure that the incentive to work hard is still there and not taken
away by inappropriate tax schemes.