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Budget 2019 failed to increase carbon taxes - Leaving Cert Economics - Question 8 - 2019
Question 8
Budget 2019 failed to increase carbon taxes. Environmentalists viewed this as a missed opportunity for the government to underline its commitment to environmental pr... show full transcript
Worked Solution & Example Answer:Budget 2019 failed to increase carbon taxes - Leaving Cert Economics - Question 8 - 2019
Step 1
Explain the terms progressive tax and regressive tax providing an example in each case.
Answer
A progressive tax is one where higher-income earners pay a larger portion of their income compared to lower-income earners. An example is the income tax, where rates increase as income increases. For instance, an individual earning €50,000 may pay a tax rate of 20%, whereas one earning €100,000 would pay 30%.
Conversely, a regressive tax takes a larger percentage from low-income earners. For example, a sales tax or V.A.T. affects lower-income individuals more significantly as it constitutes a larger part of their overall income. If a household spends a fixed amount on consumption, a poor household pays a heavier tax burden than a wealthy one, regardless of their income level.
Step 2
In your opinion, did the government make the correct decision in failing to increase carbon taxes in Budget 2019? Support your answer with relevant economic evidence.
Answer
In my opinion, the government did not make the correct decision in failing to increase carbon taxes. With growing concerns about climate change and environmental protection, increasing carbon taxes could have generated significant revenue while encouraging businesses and households to reduce their carbon footprints.
Moreover, by not increasing taxes, the government missed an opportunity to align their fiscal policies with environmental goals. This could have fostered innovation in sustainable practices and renewable energy, ultimately supporting long-term economic growth. Notably, studies indicate that a higher carbon tax could reduce consumption of fossil fuels, thereby facilitating Ireland's transition to sustainable energy sources.
Step 3
Outline the possible negative economic effects of the government’s repeated overspending.
Answer
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Running the risk of future budget deficits: Continuous overspending can establish a pattern that may lead to future budgetary constraints, making it difficult to allocate necessary resources for public welfare.
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Uncertainty and lack of credibility in government fiscal policies: When the government cannot manage its budget effectively, it risks losing credibility, which may discourage investment and economic growth.
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Deterioration in the quality of service provision: Overspending can lead to unnecessary cuts in essential services, causing public dissatisfaction and potentially harming those who rely heavily on government support.
Step 4
Outline three possible economic effects on the Irish economy of increasing the corporation tax rate.
Answer
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Loss of Foreign Direct Investment (FDI): A rise in corporate tax rates may deter multinational corporations from establishing or expanding operations in Ireland, potentially shifting investment to countries with a more favorable tax climate.
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Increased unemployment: If firms decide to relocate due to higher corporate taxes, this could lead to job losses as companies downsize or exit the Irish market, thereby increasing the unemployment rate.
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Impact on government revenue: While the initial increase in taxes might result in higher revenue, the potential loss of companies and jobs could ultimately decrease tax income from corporate profits in the long term.
Step 5
Explain what this means.
Answer
Just social policy aims to ensure equitable distribution of resources, allowing all individuals to reach a minimum standard of living. The government should implement policies that redistribute wealth in a fair manner, seeking to improve the welfare of those below a certain threshold.
Step 6
Outline measures which the government and/or firms could consider to address the issue of the working poor.
Answer
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Increase minimum wage: Ensuring that the minimum wage meets the living wage standard can significantly improve the financial stability of the working poor.
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Affordable housing initiatives: By increasing access to affordable housing, the government can help alleviate the financial strain on low-income workers.
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Adjustment of tax policies: The government could also consider revising tax brackets to lessen the burden on low-income workers, thereby allowing them to retain more of their earnings and enhance their quality of life.