Tax


What Does Non-cyclical Mean?

What Does Non-cyclical Mean?

Share
What Does Non-cyclical Mean?
Non-cyclical is a term that can be applied throughout the economic sector. For example, non-cyclical stocks are stocks that perform absent of factors based on the state of the current economy. In other words, non-cyclical stocks are those that perform well even in a bad economy. 
Non-cyclical taxes would be those that are imposed regardless of other factors. In addition, non-cyclical taxes are those that are not based on any cycle, or those that are not cyclical in nature. The need for tax revenue is not dependent on when voting takes place. Just because voting is cyclical, does not mean that the need for tax revenue is.
Cyclical demand is the demand of an item, goods, or services in a cyclical pattern. For example, the demand for sunscreen tends to be cyclical as it is often in demand in the summer months. However cyclical data is not always appropriate. For example, sunscreen is usually required year round, regardless of the temperature. Although cyclical data would suggest that sunscreen is only necessary in the summer months, the reality is otherwise. Tax revenue is also not in cyclical demand.
Like sunscreen, their are financial principles that should always apply realistically, but intervening factors often change the cyclical demand of such principles.  For example, school budgets sometimes appear to be in cyclical demand based on the voter practice associated with school budgets. However, the reality is that school budgets are always necessary in order for schools to run smoothly and efficiently. For the taxpayer, cyclical data suggests that an increase in the school budget is necessary on a cyclical basis. 
Realistically, school budget increases are necessary on a non-cyclical basis. School budget needs change as a result of many factors, the least of which is when taxpayers vote based on their local jurisdictions laws.  However, there is a cyclical demand for an increase in a school budget which is simply based on inflation. In essence, there are many intervening factors that effect economic needs, the manner in which taxes are assigned and the manner in which tax revenue is spent. 
For taxpayers, these issues seem to occur according to cyclical data. The reality is that governmental activities, such as voting, do happen in a cyclical nature and therefore, these issues come up in that manner.
Non-cyclical economics simply mean that things do not always occur at a prescribed time. In fact, jurisdictions sometimes call for an emergency vote on some issues. In addition, jurisdictions can sometimes overturn voter's decision in specific circumstances. 
For example, although a school budget vote may be cyclical, students needs are not. A jurisdiction may overturn the voters decisions to vote a school budget down. Cyclical data sometimes makes it appear that issues of a cyclical nature, but reality suggests otherwise.

Comments

comments

Share

Related Articles


Read previous post:
How Businesses Should Handle Their Taxes

Close