Effects of Taxation on Macro & Micro economics Term Paper

Effects of Taxation on macro & little economics - Term Paper Example pass Smith, the famous father of economics was in arrears the classification of economics. This term paper seeks to evaluate the effect of revenue on both the Macro & Micro economics. Taxation is a key facet in any economy as suggested by Adam Smith in his work on edicts of Taxation .The paper also suggests the argonas of further study, in which researchers and opposite scholars are invited to work on. The Overall the study of economic environment is divided into two halves, microeconomics and macroeconomics. The Micro originated from a Greek word. The word means small. Microeconomics entails the study of individual economic units. It is concern with particular individual elements in the economy. It thus gives a worms eye view of the economy.Macro originated from Greek word whose signification is large. Macroeconomics entails the study of global perspective of the economy. It combines the national or internati onal economy concepts of economy e.g. Total Output, Income and Expenditure, Unemployment, pretension Interest Rates and Balance of International Trade, etc and what economic policies a government can pursue to bias the conditions of the national economy. It thus gives a birds eye-view of the economy (Gupta 409) This term paper will focus on tax incomeation as a factor that arrogates both micro and macro-economic fields. The overall function of taxation is to provide monetary resource to finance the activities of government and can be discussed in the following terms First, Tax revenue is postulate to grant for goods and services which government provides These could be public such as defence or virtuousness goods such as education and medical services respectively. Second, a major function of taxation is to carry about some redistribution of income of income progressive tax system. Third, Tax revenue may be used to pay interest on national debt. Fourth, Taxation may be used as a fiscal policy instrument to influence full employment levels. Fifth, Social welfare function is the use of tax to discourage the production of harmful commodities. Sixth,-Protection policy Function. The Seventh function is the economic st powerfulness goal by discouraging unnecessary expenditure (Marshall 87). Adam Smith was the first economist to study the principles of taxation and how they affect the economic environment. Adam Smith came up with principles of taxation these are equity, certainty, economy and convenience. He came to believe that when a tax is imposed certain conditions must be fulfilled. These conditions are what he called canons of taxation (Marshall 324).These are The Canon of Equity This refers to the fairness of a tax system. Its borne out of the feeling that the states subjects should support the government in a proportionate way in regard to the revenue they derive (Marshall 324). This means that every soul should pay the tax based on the ability they don t pay the amount. T here(predicate) are three approaches of achieving equity, namely The Benefit Principle under this approach, benefits derived from the consumption of goods and services are used as the basis for taxation. Thus people should be taxed according to the benefits they derive from the consumption of public goods. The disadvantage here is to determine the benefits and expenditure of each tax payer. First, The ability to pay Here the argument is that citizens of a apt(p) country are differently endowed in wealth and earnings. Besides the government cannot raise enough funds to finance public expenditure if each and everyone was asked to pay the same amount of tax. So ability to pay should be the basis for taxation because the tax burden is distributed equitably. However, ability to pay is very unenviable to effect because of