The decision to allow individuals to prioritize loan repayments to banks over tax obligations is rooted in a strategic economic approach aimed at stimulating growth and recovery, particularly in the wake of financial crises such as the 1929 Wall Street crash. During times of economic downturn, governments often face the challenge of kick-starting stalled economies and restoring confidence among consumers and businesses.
One way governments address this challenge is by incentivizing borrowing and spending, as it injects much-needed liquidity into the economy and promotes investment and consumption. By allowing individuals to pay back loans before taxes, governments effectively encourage borrowing, as individuals can use borrowed funds to invest, expand businesses, or make purchases.
Additionally, the cycle of borrowing and spending generates economic activity, leading to increased income and profits for individuals and businesses. As these entities generate income, they become liable for taxation, thereby increasing government revenue over time.
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Негізгі бет Why Do You Pay Interest Before Taxes?
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