What Are the Three Arguments Economists Provide Against Using Earnings

question 65

Essay

What are the three arguments economists provide against using earnings as a value-relevant attribute in valuation?

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Definitions:

Federal Government

The national government of a federal state, which holds the central political authority over the collection of states or provinces.

Progressive Taxes

A taxing mechanism where the tax rate increases as the taxable amount grows, resulting in individuals with higher incomes paying a higher percentage of their income in taxes.

Direct Taxes

Taxes levied directly on individuals' or entities' income or wealth, such as income tax and property tax.

Social Security Tax

A tax levied on both employers and employees to fund the Social Security program, which provides benefits to retirees, the disabled, and children of deceased workers.