Do Tax Cuts Stimulate the Economy
Cutting taxes by federal, state, and local governments will always stimulate the economy in any economic environment. It seems that the debate on the pros and cons of cutting taxes is more prominent during a recession or downturn in the economy, as is the case now, but tax cuts should always be a top priority for everyone from politicians to voters. The most recent presidential proposal is the Bush Stimulus Package, based on his vision for economic recovery, "low taxes, low spending on social services, high military spending. Under his view, reducing tax rates for businesses and rich individuals stimulates investment" (Keen 2003, p. A5). Taxes are only one of many factors that affect the economy. National security, the possibility of war, and the insecurity of investors are a few other factors, but since the tragedy of 9-11, the economy has been in a downturn and continues to tumble. It needs something to turn it around and tax cuts are one of the solutions needed, but combining tax cuts with other solutions will help stimulate the economy much faster.The theory of tax cuts stimulating the economy is referred to by most people as supply-side economics as well as several other names suc
The benefits of supply-side economics have never been more obvious than during the Ronald Reagan presidency, although Democrats have labeled this era, the Decade of Greed. "From 1982 through 1990, the United States experienced ninety-six continuous months of economic growth-the longest peacetime expansion in history" (Limbaugh 1993, p.113). Contrary to what the democrats want us to believe, this growth was not limited to the rich. Federal Reserve data shows that families with incomes between $10,000 and $50,000 a year experienced a higher percentage of growth in net worth than those in the top-one-fifth income groups, and between 1983 and 1989 the total population under the poverty line decreased by 3.8 million people. Also the 1980s was a decade of increased personal and corporate charitable giving (Limbaugh 1993, p.114). There are many other statistics that emphasize the benefits of the Reagan tax cuts, but the few listed above show the advantages of what cutting taxes can do for the economy. This Government considers our tax reduction and reform program...to be the most important action that Congress can take now to improve our long-range position. It should help attract capital investment, improve our ability to sell goods and services in world markets, stimulate the growth or our economy and the employment of our people Tax cuts come in all types of packages and some work faster than others. A very simple cut is lowering the tax rate for all taxpayers through payroll deductions. This plan is probably the fastest at stimulating the economy, because it gets the money back into the economy quickly. It is not always important exactly how the tax cuts are distributed, as long the result is stimulating growth. The Bush tax plan covers many areas. Accelerating the implementation of already approved tax cuts and eliminating the marriage penalty are two proposals that will have an immediate impact on the economy. Another Bush proposal to end the double taxation of dividends from corporations will encourage companies to issue dividends to th
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