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Progressive taxation

Posted by admin on October 10, 2017 in Economics, Finance with No Comments


In the tax system, we distinguish regressive, progressive, and flat taxes. All of them add an extra charge to different products and services affecting different social layers. Regressive taxes put a higher burden on low-income individuals while progressive taxes charge the wealthy population in the first place. Imagine the excise duty on cigarettes or alcohol as well as the real estate property tax. They make certain goods less accessible to the low-income population while wealthy people could still afford all these things. On the other hand, the federal income tax puts extra liability on wealthy individuals. The estate taxes and other taxes on income and business profits charge individuals who exceeded certain wealth rate.
In the US, the progressive tax historically established as the fair way to charge people proportionately to their income. It looks fair that wealthy individuals capable of paying more to the government shall contribute more than those below the poverty level. But the system is rather complicated in action. The tax on the “excessive wealth” discourages people from earning more or induces them to push their wealth out of the reach of the federal agencies. Certainly, taxes would not stop people from striving for more in their business but it will push them in the shadow economy sooner or later.
The flat tax seems to be fair from every perspective. If the poor and the reach are charged equally, then none of them is discouraged from earning more. But even flat tax often puts an excessive burden to those living on the minimum salary.

Wall Street regulation

Posted by admin on October 10, 2017 in Banks, Finance with No Comments


The Dodd-Frank Wall Street Reform passed by the Obama administration in 2010 became a critical step in addressing the world crisis. It totally rejected the pre-existing deregulation of the financial sector that let banks accomplish risky deals. The act restricted the capitalization of banks, reinforced mortgage requirements, and curbed the excessive risk-taking of the banks. Though the legislation automatically restrained the growth of the financial sector, it intended to cope with the consequences of the crisis of 2008.
The Dodd-Frank act is strongly criticized in Washington. The ability of financial institutions to make money decreases due to the numerous positions of the document. The competitiveness of the American companies in the international market falls because of the governmental regulation. The lack of liquidity may damage the bond market which lacks a constant supply of buyers and sellers. Critics believe that over the time the act would drag high unemployment together with low wages and living standards. Besides, the act involves a dozen of newly-created federal agencies to oversee its 225 provisions enforced.
Looking at the excessive regulation of the financial sector, policymakers attempt to repel it the Dodd-Frank act. But currently, the legislation can only be amended. The act impacted international banking agreements so that it is impossible to reverse it so far. Anyway, American banks will not face any dramatic changes in the near time even if some positions of the act are changed soon.

Speculative and productive investments

Posted by admin on October 10, 2017 in Finance, Investment with No Comments


Investment and speculation have something in common. Both of them can generate income though in different ways. Before making an investment, people typically do a thorough market research to find out whether it would be profitable to put their money into the business. There are various ways to invest – start one’s own businesses, buy property or shares in a promising company. Most of them require a direct participation of the investor. They are supposed to run a business or renovate the housing they lease out. The case with speculators is very different.
People who speculate on prices are not fully-fledged market participants. The moment they find certain market conditions lucrative to play on, they participate immediately. Otherwise, they just stay aside and monitor where to put their money and get the largest revenue right away. Speculators usually act like intermediaries reselling goods or services. They gamble and win if prices on the goods they have purchased suddenly skyrocket. Importantly, speculators do not provide any services to charge customers. They practically make money out of thin air inflating prices on popular products.
In terms of getting an immediate revenue, gambling can be effective. Speculators who can perfectly forecast recent market trends, usually earn a generous sum momentarily. But when we think of a stable long-term income, productive investment is the only way to generate it. Earning a surplus may take some time but businesses or property can sufficiently expand over the years. Investment certainly contains a risk, but investors still can choose an option with the lowest risk. Productivity is a core condition of safety. Without producing things we can only gamble, which poses a great risk to the property we own.

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