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> Unmarried: Man earns $200k/year, pays his maid $25k/year. GDP = $225k. Married: Man earns $200k/year, pays his wife $0. GDP = $200k. At a 10% income tax rate
by jpdoctor 15y ago
> Unmarried: Man earns $200k/year, pays his maid $25k/year. GDP = $225k.
Married: Man earns $200k/year, pays his wife $0. GDP = $200k.
At a 10% income tax rate: First case is $22.5K/yr, second case is $20K/yr.
So yes: GDP is the same as income for the gov't for practical purposes.
- pyre 15y ago1. The government does not tax GDP. 2. IIRC, GDP includes government spending, which means that those tax dollars also go towards the GDP number (which are also less in the second case).
- theplatypus 15y ago1. GDP can either be viewed as the total income or total expenditure of an economy. The government taxes income. 2. The government taxes any money it spends and tax dollars do not increase GDP.
- pyre 15y agoIf government spending increases the GDP, then tax dollars indirectly do so. The government cannot spend tax dollars that it does not collect (without borrowing). Dollars that are not spent on taxes are not necessarily destined to be spent right away (vs. putting them in the bank / under the mattress).
- jpdoctor 15y agoYou're missing the point: You wrote that "The government does not tax GDP." It does. Also, anything that the gov't spends then counts as income for the other party = more income for the gov't. It is why debt-to-GDP is a very important ratio. It is also why the PIIGS were obvious candidates for financial meltdowns.