Obama’s turn: What is he going to do with Tax Cuts?
30 Aug 2010 Leave a Comment
The Bush tax cuts are viewed as the tax system for the rich, because the rich pay smaller proportion of their income for tax. It is based on the regressive tax cuts. Regressive tax cut system basically refers to the system in which the effective tax rate, which is the percentage of one’s income one pay in taxes, decreases as income goes up. That is, rich people pay less percentage of their total income than poor people do. While there are many different opinions on this, according to the article, President Obama wants to expire this tax cut and bring in a more progressive tax system to promote fairness in paying taxes. If a tax is progressive, unlike regressive tax, the effective tax rate increases as a person’s income goes up. That is, rich people pay higher proportion than the poor do. The economist Mark Zandi insists that the tax cut should be expired after the economy is fully driven out of the economic recession. The reason is that the rich will start conserving their money since they will be paying higher proportion of their incomes as taxes. Nevertheless, the President believes that making tax more progressive is the key to satisfy the fairness. As you can see on the top left hand side, the graph shows how progressive tax curve is pointing upwards, whereas the regressive tax curve is pointing downwards. Although there are a lot of debate on this controversial issue, Obama seems to expired the Bush tax cut for the altruistic goal of achieving fairness. Whether his decision is correct will be determined later by citizens.
Extend the Bush tax cuts: Is it FAIR?
26 Aug 2010 Leave a Comment
According to the article, there are many debates over whether to extend the Bush tax cuts. Currently, the Obama Administration has defined “rich” if an individual earns more than two hundred thousand dollars a year or a household earns two hundred and fifty thousand dollars a year. Although some Conservatives consider the Obama
Administration’s threshold for the “rich” to be low, people who are to be categorized as “rich” by the new administration still belong to top 3 percent. Hence, increasing the tax by a little will not cause individuals or households to break down financially. However, there is a big irony that you can find in the tax cut systems in the U.S.: the top and the second-highest bracket of the whole population pay the SAME amount of tax, when their income differs. It is strange because the top bracket population generally pays less than they should be paying, if the system were to be “fair.” Nevertheless, the rich still says that it’s not fair, for they are not as privileged as they should be.
The diagram above is the graph of Lorenz curve. This curve illustrates the degree of equality of distribution of income with the use of Gini coefficient, which measures the degree of income inequality. When the value of Gini coefficient is closer to 0 (when the Lorenz curve is more angled), the income inequality is greater, and vice versa. Currently, the U.S. is not achieving the straight Lorenz curve (Gini coefficient closer to 1), which means there’s a great income inequality.
To evaluate the fairness of the Bush tax cuts, multifarious opinions from different stakeholders can be analyzed. Having the tax cuts will be more beneficial to all the stakeholders (poor, middle class and rich) than eradicating because then, all the stakeholders will be taxed heavily. However, when the issue of fairness comes up, the middle class might complain.
The Japanese Economy Facing Economic Challenges
01 Apr 2010 1 Comment
I found the five major ideas presented in the article as to why the Japanese economy faces great challenges:
1. Deflation
=a reduction in the level of national income and output, usually accompanied by a fall in the general price level.
2. Underdevelopment
= a rate of development that is slow or negative.
3. Issues in confidence
=Japanese economy lacks in giving strong opinions or taking practical actions to certain issues.
4. Less profit from export
= a decrease in part of the real GDP earned through export
5. Lacking entrepreneurship
= staying safe, and not undertaking risks in order to maximize the economy’s profit.
OECD country – Republic of Korea
29 Mar 2010 Leave a Comment
in Economics, Section 3, Vietnam/Korea
1. Real GDP for the last decade
Real GDP for the last decade in Republic of Korea (S. Korea) has increased in general. However, S. Korea experienced declines in real GDP in 2001 and 2008. The real GDP reached over $1000 billion once in 2007, but it soon decreased to about $900 billion in 2008.
2. Real GDP per capita for the last decade
Real GDP per capita for the last decade in S. Korea has increased gradually. However, there was a slight decline from 2008 to 2009. The highest real GDP per capita over the decade is $19,716 (2008) and the lowest is $14,468 (2000).
3. Real GDP growth for the last decade
Real GDP growth for the last decade in S. Korea has been unstable each year. In the beginning of the decade, the growth rate was high (7.67%). Then the growth slowed down to 2.62% in 2003. Although it gets back up to around 4.00% from 2004 for 4 years, it drops to 1.93% again in 2008. In 2009, S. Korea experiences negative growth (-3.06%). That is, there were more harms than benefits that year in S. Korea.
4. Conclusion.
I think that S. Korea is slowly developing and growing to be a MEDC. However, S. Korea has been experiencing severe economic recession along with all the other countries recently. Therefore, they marked negative growth and a decrease in the real GDP measurements. However, seeing the trends throughout the last decade, I think that S. Korea will be able to make its economy stable and powerful in a few decades or even years.
