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Non-Cyclical Taxes at a Glance

Non Cyclical

Non-cyclical taxes are revenue streams that are free of any influence of cyclical demand. These revenue streams from taxes may vary but show no reason for changing in accordance with changes in cyclical data trends. This form of fiscal policy is influenced by the needs of a government or the people aside from market pressures. Some dispute the existence of a non-cyclical tax because tax policy is so heavily influenced by the economy and cyclical demand. However, some economists have rejected the idea of a business cycle. Instead, he emphasized a country's larger economic trends. He recommended that all tax policies should not be influenced by cyclical data and economic pressures. This is another form of government non-interventionism on the economy.

Among these economists, it was argued that it was not of primary concern of government to pander to the irrational will of cyclical demand and focus its economic policy on monetary policy. This is an extremely centralized approach to government. In fact, they argued that the government should have no role in the economy whatsoever, given the fact that the Federal Reserve, the primary monetary policy maker, is private. Friedman recommended to the states ignore cyclical data and hold steadfast to political pressures to allow the market to correct itself. This theory is impossible for state politicians because political expediency is of primary concern to elected lawmakers. The need to adjust taxes according to cyclical demand is counter-intuitive to the entire democratic system. Absolute usurpation of the economy by the private sector hinders the chances of re-election for all politicians because the public needs an immediate response in search of the solace. These economists have an acute understanding of economics but do not understand the political side of the making of tax code.

Non-cyclical taxes are as elusive as the city of El Dorado. All revenues from taxes are heavily influenced by cyclical data, regardless of elasticity of demand.

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