The Taxes Of Sugary Drinks Free Samples †MyAssignmenthelp.com

Question: Discuss about the Taxes Of Sugary Drinks. Answer: Argument For: If the government of Australia combines taxes with subsidies on various beverages and foods, it can significantly enhance citizens health while potentially saving billions in health-care expenditure due to reduced consumption which in turns decreases obesity. The taxes of sugary drinks/unhealthy foods will help address massive and increasing obesity burden (A$4 billion yearly) and its related chronic illness. Sugar tax will tweak drinks and food prices hence making healthy alternatives increasingly affordable compared to unhealthy commodities. This will influence what people buy. This can work in the same manner as cigarettes and alcoholic drinks taxes that reduce smoking and drinking respectively. A sugar tax leads to extrenal cost as suagr drinks impose higher external costs on the society . The overcosnmption of sugar remains a major trigger of health problems like obesity and its related ailments like back pan and heart diseas. These extrenal cost are manifested in higher cost imposed on natioal health service. The poor health negatively imapcts work hence productvuty. Thus sugar consumptions social cost is higher than sugar private-cost. The diagram illustrates the effct of sugar with external-costs. Free-market prcie is Q1 whereas is Price P1. Yet socially effcient poin is at Q2 whereby social-marginal benefit (SMB)=Social-marginal cost (SMC). The panecea is to impoase a sugar tax that increase price thereby reducing quantity. Argument Against: These products have inelastic demand and hence sugar tax will not bar their consumption. The effect will be that the government will be hurting its own people due to increased prices but will never meet the intended purpose of limiting consumption and a reduction on incidence of obesity and hence reduced costs of obesity. The government should thus use other non-tax strategies like creating awareness on health risk associated with obesity without necessarily increasing prices. J.M. Keynes simple idea is called the demand side policy. Keynes held that the government should step in and assist individuals who do not have the work. Keynes held that where people are working, the economy will be good but economy will be bad when people do not work. Keynes held that where the economy is bad (recession), the people wish to save their money. That is, people do not spend their money on, or even invest in, items their need. Consequently, there will be less economic activities. Thus the government must spend extra money where people do not have work. The administration will then borrow money and given the citizens jobs or work. The working individual will thus spend money again and purchase items. This will help other individuals to get job. The automatic changes in fiscal position (budget deficit or surplus) during the recession take place due to automatic stabilizers. In the absence of a novel legislation, the automatic stabilizers will increase the budget deficits during recession. These stabilizers enact countercyclical policy without lags linked with legislative policy alterations. The people will never automatically pay taxes ((VAT) and income tax) and the government will spend more on unemployment benefits. The deceases taxes and increased government spending will not act as a check on aggregate demand. The tax revenue will drop but government expenditure on benefits leading to increased aggregate demand. The automatic stabilizers corporate profits, progressive income tax and unemployment insurance (UI) program. Taxes on corporate profit will drop rapidly during recession times. Progressive taxation will make many individuals fall in lower income tax brackets or make them have no income tax liability thereby increasing size of government budget deficit or decrease surplus. An example of a discretionary fiscal policy (expansionary) like increased government expenditure will lead to an immediate increase in the aggregate demand hence a reduction in budget deficit. The tax cut will have a moderate effect with more time lag since people could not immediately spend their surges in disposable income drawn from tax cut. A fiscal contraction might feasibly enhance macroeconomic performance when emphasized on wasteful government projects spending. When the government cuts the spending on wasteful projects the effects can be twofold: The government will let the private investors to produce efficient and useful commodities or project and hence improved macroeconomic performance. The other way is that the saved cash that would have been wasted can be diverted in the production of more useful product in better projects that make the living standards improved and hence improvement in the macroeconomic performance. Monetary policy can be used effectively to create economic stimulus. The monetary policy leads to effective stimulus package which encompass measures placed together by the administration for the stimulation of the struggling economy. The government uses this stimulus package for the reinvigoration of economy as well as prevention or reversal of a recession thereby boosting employment and expenditure. Makin argues that monetary policy is more effective than fiscal policy. The fiscal policy is faced with difficulty with proper timing as forecasting economic activity is never an exact science. This is due to the lag between the point fiscal alterations are required and the instance that the need to act is vastly acknowledged. A significant amount of time between time of recognition and time that fiscal policy alterations are really enacted. Another challenge is with achieving correct timing is that the influence of an alteration in fiscal policy could never be felt till 6-12 months following the occurrence of change. The poorly timed fiscal policy might in essence increase inflation thereby accelerating plunges in economic when economy has already begun to slow down.