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ECONOMIC BALANCE - METHOD ON HOW TO REDUCE THE DEFICIT




INTRODUCTION

At the beginning of the year, government tends to form a fiscal budget plan for that year and it would be a surplus and deficit result. The deficit will happen while the expenditure is greater than the revenue which means a lack of funds. This was actually not good for a country.  To decrease the deficit, the government should probably have to make change and adaptation on the two aspects which is either increasing the income such as revenue or a decreasing in output such as spending.

 

INCREASING OF TAX

Firstly, to increase the income, the government could make an increase on the tax. Tax is one of the biggest incomes of the government, it could divide into many types, such as individual income tax, corporate income tax, sales tax, capital gains tax, and so on. An increase in the tax could help to cover more of the spending which are good for development. However, the overclaim of the tax would decrease the buying power of the people and ruin the economy as well, so that the tax rate should be controlled well to avoid this problem.

 

IMPLEMENT NEW  FORM OF TAX

Except from increase the tax rate, the government could also try to implement the new tax on other aspects. For example, the United States and some western countries are trying to implement a tax on internet business especially google advertising and also YouTube advertising. This action is quite good for the long term from a government perspective because implement a new tax actually opens up a new source of income. Compare with just increase the tax rate on existing tax, new sources of tax could increase more income for the government. However, it could probably cause a lot of disputes. 

 

ISSUES TREASURY BONDS

Besides that, in the short-term view, the government could issue treasury bonds to increase the income to overcome the sudden situation.  This would make government and country become debtors. Based on the country's income and economic situation, it could probably borrow a high amount of funds, and because the treasury bonds are usually safe and less risky so that the interest would also lower. In fact, some of the western countries are actually issued treasury bonds frequently and continuedly such as weekly and monthly. Treasury bonds have lower interest, but it was also attractive for investors because the interest from treasury bonds could exempt from income tax. (Freund, 2017)


STIMULATE ECONOMIC GROWTH

More than that, in the longer-term perspective, the government should always try to develop and stimulate economic growth. This could actually increase the spending at the very first timeline, but it would bring a higher return at the latest timeline to recover back the cost and bring more income. This method could be more dependable, sustainable, and more beneficial in the long-term. As the economy grow more, the income of people and corporations will also increase, and the tax collect would also be improving. For example, the government could pay extra subsidy and rescue funds, bailout, and so on.

 

DECREASE SPENDING

Other than the increase in income, the output should be also decreased, if not how much income also could not fulfill the unlimited wants. To decrease the spending, the government could first analyze the situation of the area, the return of investment, the return period needed, and so on. By having all of this information, it could probably set up a priority for the investment and choose to decline and delay the lower priority project to save and decrease the spending for other use. This method is actually not very may slow down the development of the country,



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