<p>The fact of the matter is that government taxes are basically always spent. So while you can analyze the separate effects of spending vs taxing, in reality they go together.</p>
<p>Taxes cause substantial deadweight losses, an estimated <a href="https://governology.substack.com/p/taxes" rel="nofollow noreferrer">30% of the amount collected</a> in the US. This is of course in addition to reducing the taxed person's ability to spend that money.</p>
<p>When a government spends money, it should be expected that government spending is generally less productive than private spending. <a href="https://www.nber.org/digest/jan00/how-government-spending-slows-growth" rel="nofollow noreferrer">Some have estimated that its around 1/3rd as productive.</a></p>
<p>So going by this, it seems that changes in government spending has a larger effect on the GDP over time than changes in volume of taxation. But again, those things basically always go together.</p>

CC BY-SA 4.0
2023-07-22T16:27:21.373Z
2023-07-22T16:27:21.373Z
Governology
<p>True or False: Changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption </p>

<macroeconomics><monetary-policy><fiscal-policy>
Do changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption
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# Do changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption

(Asked by: username_0 on 2018-05-14)

True or False: Changes in fixed taxes have a bigger effect on real GDP compared with government spending because they affect consumption

**Tags:** macroeconomics, monetary-policy, fiscal-policy

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## 1 answers

### Answer by username_1 on 2023-07-22. Score: 0

The fact of the matter is that government taxes are basically always spent. So while you can analyze the separate effects of spending vs taxing, in reality they go together.

Taxes cause substantial deadweight losses, an estimated [30% of the amount collected](https://governology.substack.com/p/taxes) in the US. This is of course in addition to reducing the taxed person's ability to spend that money.

When a government spends money, it should be expected that government spending is generally less productive than private spending. [Some have estimated that its around 1/3rd as productive.](https://www.nber.org/digest/jan00/how-government-spending-slows-growth)

So going by this, it seems that changes in government spending has a larger effect on the GDP over time than changes in volume of taxation. But again, those things basically always go together.


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