Other slides in this set

Slide 2

Preview of page 2

Here's a taster:

LABOUR MARKET
MEASURES
· Lower rates of income tax
· Reducing state welfare benefits, and
`welfare to work'
· Education and training
· Trade uniform reforms…read more

Slide 3

Preview of page 3

Here's a taster:

LOWER RATES OF INCOME
TAX
· Marginal rates of income tax may be reduced
to create incentives to work, or tax
thresholds or personal tax allowances may
be raised.
· There is increasing support for the UK to
adopt a flat-rate, or proportional, income tax,
following their introduction in other EU
countries.
· Supple-side economists argue that high
income tax rates and a high overall burden
upon taxpayers create disincentives to work
which have negative impacts upon national
income and the governments total tax
revenue. This illustrated by the Laffer curve in
Figure 14.5…read more

Slide 4

Preview of page 4

Here's a taster:

THE LAFFER CURVE…read more

Slide 5

Preview of page 5

Here's a taster:

EXPLAINING THE LAFFER
CURVE
· The Laffer curved, named after supply side
economist Arthur Laffer, shows how the
governments total tax revenue changes as the
average tax rate increases from 0% to 100%.
· Tax revenue, logically, is 0 when the average tax
rate is 0%, but the diagram also shows that total
tax revenue is again 0 when the tax rate is
100%.
· With an average tax rate of 100%, all income is
paid to the government in tax.
· Clearly there will be no incentive to work in paid
employment in this case, so the government
ends up collecting no tax revenue.
· Between the extreme tax rates of 0% and 100%,
the Laffer curve shows tax revenue first rising
and then falling as the average rate of taxation
increases.
· Tax revenue is maximised at the highest point on
the Laffer curve, which in Figure 14.5 occurs at
an average tax rate ( for all taxes) of 50%.
· Beyond this point, any further increase in the
average tax rate has a negative effect on total
tax revenue.…read more

Slide 6

Preview of page 6

Here's a taster:

REDUCING STATE WELFARE
BENEFITS, AND `WELFARE TO
WORK'
· Reducing benefit levels creates
incentives to choose low paid
employment rather than claiming
unemployment-related benefits.
· Welfare benefits can also be made more
difficult to claim.
· Employment programmes such as the
New Deal are part of the government's
`welfare to work' strategy to increase
levels of employment and labour
participation.
· `welfare to work' is the term used for a
range of approaches, also including the
Working Families' Tax Credit and
introducing of a national minimum wage,
designed to increase incentives to supply
labour rather than live off benefits.…read more

Slide 7

Preview of page 7
Preview of page 7

Slide 8

Preview of page 8
Preview of page 8

Slide 9

Preview of page 9
Preview of page 9

Comments

No comments have yet been made

Similar Economics resources:

See all Economics resources »See all resources »