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December 16, 1950

Taxes and Economic Incentives

JAMA. 1950;144(16):1416. doi:10.1001/jama.1950.02920160090051

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Abstract

Realizing that the heavy revenues needed to finance greatly increased governmental expenditures can only be raised in an expanding economy, the author has prepared an analysis and appraisal of the principal taxes now employed from the standpoint of economic incentives. His study opens with a general discussion of taxable capacity in a free enterprise economy, which he defines as "the capacity to raise revenues without extreme interference with productive activity and the operation of the economy." The principal determinants of taxable capacity —the volume and composition of national income, the nature of governmental expenditures, the available methods of taxation and the reactions of people to tax burdens—are reviewed. Major emphasis is placed on the reactions of taxpayers. The four major taxes—income, sales and excise, property and payroll— are each examined in relation to four principal incentives essential to a dynamic and growing economy. These are the incentives to establish new

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