Taxes

Introduction

In this project I will talk about taxes and I will referre to several opinions about taxation that some well known economists have had during the years. But, in order to understand these opinions, we first have to know what taxes are and why, although some economists argue that taxation results in economic inefficiency, we need a fiscal system.Taxes are categories of public incomes created by collecting , according to the law, a part of people's or organisations' incomes or fortune, in order to cover public expenses.We need a fiscal system because the money collected through taxation are used in areas like public wealth, education, public construction.

,,Taxes are sometimes referred to as direct tax or indirect tax. The meaning of these terms can vary in different contexts, which can sometimes lead to confusion. In economics, direct taxes refer to those taxes that are collected from the people or organizations on whom they are ostensibly imposed. For example, income taxes are collected from the person who earns the income. By contrast, indirect taxes are collected from someone other than the person ostensibly responsible for paying the taxes."1

Lets analys the influence taxes have on an economy.In figure a we have a good in an ideal no taxed economy.The price is established freely by the market. The equilibrum price,when the demand= the supply,is p1 and the quantity is q1. In this case social surplus,which is equal with consumer suplus+producer surplus, is maximized (assuming no externalities).

Figure a.2

1. http://en.wikipedia.org/wiki/Tax

2. ibidem

In figure b we have an economy where taxes are used.In this case we have a new equilibrum The level of price equilibrum increases from p1 to p2 and this results in an increas of supply and a decreas of demand.If the demand is lower the quantity of goods sold at equilibrum decreases fom q1 to q2.The government receives the amount of tax paid for each unit