It’s not like they appear out of nowhere after all. If you need a trusted advisor who does more than just filing your annual income tax return, contact ARI today.The goods that a business sells come with a cost.
Please stay tuned for next week’s tax article for illustrations and a discussion on why our government income must increase, or expenses must decrease. The difference between a government budget and a household budget, is that a household recognizes their budget is their sole responsibility. As taxpayers, we seem to believe that someone else will pay for our budget changes. If our household were to continue this process each year, eventually the household would be committed to expenses that exceed the household income, and the household would be bankrupt.Īs taxpayers this is where we find ourselves now and we’ve reached a point Where we either must increase revenue or decrease expenses to avoid bankruptcy. Rather than working more or reducing expenses to pay the increases in the household budget, the household can put the additional expenses on a credit card. This allows the household to “spread” the current year increase in expenses over many years into the future. Of course, the household recognizes that in doing so, their monthly credit card bill will go up in the future and the credit card bill will need to be paid. Obviously, requiring one adult to shoulder the entire burden for changes in the household budget, whether increasing income or reducing expenses is not going to go over well. So, how does the household please everyone? Use debt financing to cover the changes in the household budget. It would require less additional time for the higher-earner adult to balance the household budget, but is it fair to ask this adult to work more for the changes in household budget? Wouldn’t it be fairer if both adults worked 10% more? There are 168 hours in a week. Our household can use more of their limited time to increase income (production), one adult can use more time than the other to increase income (distribution), and the household can adjust their time by determining which expenses are essential and which are discretionary (consumption).Ĭontinuing our household example, let’s assume one of the adults in the household earns significantly more income than the other, and household expenses have increased by 10%. The definition of economics is “ the allocation of scarce resources for production, distribution, and consumption.” In our household example the scarce resource is time. Imagine a household of 4 (two adults and two children) with an increase of expenses of 10% and the two adults disagree on the solution for balancing the household budget. One, supports increasing income, while the other supports decreasing expenses. Both are viable solutions for balancing a household budget, but there are trade-offs that must be accepted for either solution. When households are facing increased expenses, they logically do one (or a combination) of two things they increase income or decrease expenses.
0 kommentar(er)
