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How do taxes affect the economy?

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Quick Answer

Taxes help to raise capital for the economy and help create opportunities for investment from other countries. Taxes also provide financial support for education and help to limit the control of the government on society.

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Full Answer

In the 18th century, philosopher Adam Smith researched a number of economic questions related to taxes. His main quest was to uncover why some economies performed better than others. At the root, Smith found differences in tax structures for various countries. Taxes offer an opportunity to preserve personal property and free exchange, while promoting the benefits of business activity and education. In turn, it helps to create a more productive and peaceful society.

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