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Tax Changes: Good Thing or Bad Thing?

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Lately we have read about paying less taxes, more taxes, having more deductions, less deductions and of  winning and losing from the tax change legislation.  How should a student evaluate the proposals and statements about winners and losers from tax change?

IT DEPENDS!  Much of the reason there are confusing pronouncements by politicians and others, along with what seem to be competing analysis of the “tax package”, is because like most economic issues the analysis depends on the opportunity costs and how those will impact various individuals and groups.

There is no right or wrong conclusion to the tax package itself, the discussion or analysis should to be on the long-term benefits and opportunity costs the legislation will impose. Those opportunity costs often depend on who is assessing them and how much we perceive the costs will be.

The process of economic analysis, The Economic Way of Thinking, should take in to account the opportunity costs, the benefits and how people may perceive or judge those differently. The best route for students is to try to assess the long-term and the short- term opportunity costs and arrive at their own decision on whether the tax package provides more benefits than costs and to which individuals and groups.

The only certain answer to the analysis is that the tax package does indeed provide both benefits and costs

 to individuals and groups across the country.  We as individuals and citizens must decide whether the changes are a good thing or a bad thing – economics will not provide the answer.  However, the discipline of economics and an Economic Way of Thinking do provide a framework for individual analysis.

Ken Leonard is the Associate Vice President for the Foundation for Teaching Economics.

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