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    Taxes or Spending Cuts?

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    Would you propose and increase in taxes (to raise revenues) or a decrease in spending (to reduce expenditure) to address a deficit?

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    Solution Preview

    The proposal to increase taxes to help address the state's financial crisis has limited scope. Wealth can be taxed, luxury limousines can be taxed, and houses over 300 sq. meters can be taxed. There can be an increase in income/payroll taxes. However, these measures have limitations. Increasing taxes reduces demand in the market and stifles economic activity. The state government is reeling under high expenses and interest payments.

    The most effective method of addressing the state's ...

    Solution Summary

    Spending Cuts are explained in a structured manner in this response. The answer includes references used.