Understand economics from scratch

Chapter 39 How to Gain Insight into the General Economic Trend from Financial News—Economics You Need to Learn to Understand Financial News (5)
How did an ancient virtue become a modern vice?There are two things we have to consider that help our understanding of the problem: one is that we must always remember that one plus one does not necessarily equal two in economics.That is to say, what is good for a single individual is not necessarily good for all; in some cases, the individual shrewdness of a member of a society can be the stupidity of the whole society.The second is that the reality of resolving the paradox of thrift lies in the question of whether the economy is at a depression level.In an ancient society, we were always at full employment; therefore, the more we expended the national product for current consumption, the less was available for capital formation.If output can be assumed to always be at its potential level, then the traditional theory of thrift is absolutely correct, both individually and socially.In other words, the existence of the paradox of frugality has its specific conditions of social and economic development, not to say that it is always the case.

Who will ultimately bear the burden of taxation

The concept of "tax incidence" in economics refers to the ultimate economic burden of a tax.It should be pointed out here that it is formulated corresponding to the statutory taxpayer. The reason for this is that the ultimate tax burden and the statutory taxpayer are sometimes inconsistent.

While shopping at Walmart in New York, Smith picked out a nice jacket that cost $100.When paying the bill, the cashier asked him for $108.The $108 included an 8% sales tax on the receipt given to him.Smith has experienced the same situation in other states, but at that time, the retail sales tax was 6%.In the United States and some European countries, customers have to pay the corresponding sales tax according to the model of "multiplying the price by the tax rate".According to the receipt, Smith can know how much tax he has paid in this shopping in a timely and accurate manner.Later, Smith came to Beijing for tourism and made purchases in a large supermarket.However, when he saw his receipt, he found that apart from the price and quantity of the goods he bought, the tax rate he was used to seeing was gone, so he had a question: when shopping in China, consumers do not have to pay sales tax?
The tax systems of the United States and China are different, and the corresponding taxes in my country are value-added tax and consumption tax.One thing Smith saw, however, is that in our country's sales, the customer pays what the commodity is marked for, and that's all.If we do not conduct economic analysis, we may have such an illusion: Whoever collects the sales tax will bear the tax burden.Therefore, many people believe that in China, the tax on sales is aimed at merchants, and merchants are the bearers of this tax.So, is that really the case?

There is a concept of "tax incidence" in economics, which refers to the ultimate payer of a tax.The reason for this regulation is that there is still a concept of a statutory taxpayer, which many people do not understand. Isn’t the statutory taxpayer the ultimate tax bearer?For example, the working class, the personal income tax we pay, in this way, aren’t we legal taxpayers?Yes, at this time, as an employee, you are a statutory taxpayer, but if the enterprise is a statutory taxpayer, the enterprise may not be the bearer of the final tax burden.For example, when an enterprise recalculates costs, it often takes taxes into account to increase the terminal selling price of products.Passing taxes on to consumers is called tax shifting.There are many ways to transfer the tax burden, including forward transfer, backward transfer and mixed transfer.Forwarding refers to the way to increase the price of goods to pass on to consumers.For example, a toy manufacturer will readjust its price strategy because of higher tax rates and heavier tax burdens. The original retail price for distributors is 100 yuan, but now it may have to be raised to 120 yuan.Post-transfer refers to passing the tax burden on to raw material suppliers by lowering procurement costs.For example, books need to use paper, because they need to pay taxes, so they tell the paper factory that it needs to be cheaper and save tax money. This is post-transfer.Mixed transfers include both forward and backward transfers.For example, when water cup factories face tax burdens, some of them pass it on to distributors by raising prices, and others pass it on to raw material manufacturers by lowering purchase prices.

However, in the transfer of tax burden, the most relevant thing to consumers is forward transfer, because most of the products we consume are products after the tax burden is passed on by manufacturers, but not all products will be passed on to consumers, because the tax burden The transfer is also restricted by the elasticity of demand. Generally speaking, commodities with high demand elasticity are not easy to be passed on, and commodities with low demand elasticity are easy to be passed on.For example, cigarettes are a necessity of life, and the demand elasticity is relatively small. Some people suggest that taxation be used to curb the growth of smokers.But such a method may not be feasible, because the demand elasticity is small, so businesses will pass the tax on to consumers. If you tax the tobacco factory, the tobacco factory will raise the price of cigarettes. After raising the price of cigarettes, it will not affect the sales of cigarettes, so The effect of taxation can only be to make consumers pay more.

Many commodities in our lives are already after-tax prices.Someone calculated such an account: In our country, if a bag of 1 kilogram of salt costs 2 yuan.It includes a value-added tax of about 0.29 yuan; and a bottle of beer of 3 yuan includes a value-added tax of about 0.44 yuan and a consumption tax of 0.12 yuan; if you spend 100 yuan on a piece of clothing, including a value-added tax of 14.53 yuan; if you If you spend 100 yuan to buy a bottle of cosmetics, in addition to the value-added tax of 14.53 yuan, it also includes a consumption tax of 25.64 yuan; if you smoke, it costs 8 yuan per pack, of which about 4.07 yuan is consumption tax and value-added tax.In short, as long as you consume, you need to pay taxes.The most important type of tax in our country is value-added tax, which is the largest tax type in our country.

In layman's terms, value-added tax is a tax levied on the value-added part of goods, that is, how much value-added goods are added from production to final consumption. Taxes are collected on profits. If there is no profit, no value-added tax is charged.Value-added tax is the largest tax category in my country, and the tax rate of value-added tax is generally 17%.The calculation formula is: tax payable = output tax - input tax.Many people may not understand this formula. Let us use a case to illustrate how the tax burden is collected and passed on:

Suppose enterprise B wants to purchase a batch of goods from enterprise A.The value-added tax rate is 17%. Company B purchases 100 pieces of goods from Company A with a value of 10000 yuan.For enterprise A, this is a sales behavior, and the state will collect value-added tax on the goods in this process. A’s sales amount is 10000 yuan, so the tax that A should pay is 1700 yuan (10000 yuan × 17%).The consumer who A wants to pass on this tax burden to him is B.As a buyer, if B wants to purchase these goods, he must pay 11700 yuan, 1700 yuan to pay tax to A, and 10000 yuan to buy the goods. For B, the 1700 yuan is input tax.

B starts to process the goods and manufactures a batch of 100 finished products with an amount of 20000 yuan and sells them to company C. This sales behavior is also taxed, and company C has to pay 23540 yuan to company B to purchase the goods.This 3540 yuan is B's output tax.Then what B should pay to the country at this time is 1840 yuan (3540-1700), 1840 yuan is B's tax payable, 3540 yuan is B's output tax, and 1700 yuan is B's input tax.After seeing this, everyone understands that in the future, C will be sold to D, and the value-added tax will be collected continuously in the process of commodity circulation in this way, so value-added tax is also called turnover tax.

I can't beat Liu Xiang, but I have to run past CPI
There was a saying on the Internet: "You may not be able to run against Liu Xiang, but you must run past the CPI." This lively statement stems from the relatively serious price rise in China at the beginning of 2008.

A netizen once said helplessly: "I wanted to buy a house, but the house price went up. I wanted to buy a car, but the gas price went up. I wanted to buy some meat, but the price of pigs went up. So I can eat instant noodles, right? As a result, the price of instant noodles has also risen.”

There is also such a joke: Drifting said to Wukong: "Brother, now the second brother is worth more than the master." This joke refers to the sharp rise in the price of pork in 2008.

At the beginning of 2008, there was relatively serious inflation in China.

In the vegetable market next to the North Courtyard in Chaoyang District, Beijing, the stalls of Chinese cabbage and spinach were crowded with people. The hawkers were sweating profusely, but the smiles on their faces never stopped for a moment.A hawker selling vegetables can earn about 200 yuan a day, but the 15 stalls on the north side of the vegetable market selling meat products are deserted. "Meat sales were very prosperous in the past, selling 2000 yuan a day, but since the end of 2007, the business has plummeted." A stall owner surnamed Hu said, pointing to the six empty stalls opposite. "Now the common people are starting to calculate when they buy meat. Several meat sellers can't keep going."

Chao Chao, an international student studying economics in the United States, spent more than half of his time doing social surveys on prices during the Chinese New Year during the one month after returning to China: when he was with his classmates, he learned about the consumption levels of different restaurants; he wanted to buy a mobile phone in China For computers, I learned about the market prices of electronic products in specialty stores and computer malls; I went shopping with my mother and compared the market prices of clothes, shoes, and cosmetics... While I was exhausted, I wrote an article titled "A Special Investigation in the Era of Price Rise" papers have been compiled.

During his market research, Chao Chao discovered that the ordinary people he has contacted—citizens who buy vegetables in the vegetable market and hawkers who set up stalls on the street—are all familiar with proprietary economic terms such as CPI.

In China's real society, the term "people's livelihood experience" is also gradually improving its "position".Because the real topic of people's livelihood is indeed closely related to oil, salt, firewood, rice, and family affairs, it is not surprising that prices have become an issue of great concern to the country.

CPI is the English abbreviation of consumer price index, which can reflect the price change index calculated from the price of products and services related to residents' life, and is usually used as an important indicator for observing the level of inflation.It is also a reference index for the price of consumer goods that reflect what we eat, drink, and use, and are closely related to people's lives.

Economics knowledge tells us that if the consumer price index rises too much, it indicates that inflation has become an economic instability factor, and the central bank will have the risk of tightening monetary and fiscal policies, resulting in an uncertain economic outlook.Therefore, the excessive increase of the index is often not welcomed by the market.For example, over the past 12 months, the Consumer Price Index has risen by 2.3%, which means that the cost of living has increased by an average of 12% compared to 2.3 months ago; when the cost of living increases, the value of your money decreases; that is, 1 A 1-yuan note received years ago can only buy goods and services worth 100 yuan today.Generally speaking, when the increase rate of CPl>97.70%, it is inflation (inflation), that is; and when the increase rate of CPl>3%, it is serious inflation (serious inflation).

The best way to deal with inflation is to invest. If the return on investment exceeds the inflation rate, assets can maintain and increase in value and avoid shrinkage.In the case of inflation, the asset preservation effect of investing in real assets is more obvious; while investing in some fixed-income products, with inflation, it will depreciate to a certain extent, such as bonds.

(End of this chapter)