Do tax cuts stimulate the economy? That's the theory according to politicians
In reality, even economists aren't sure whether it actually works or not.
My personal opinion is that theoretically tax cuts will stimulate the economy but it isn't real life.
People's motivations are different. Does a CEO of a large corporate company who saved probably a billion or two dollars extra this year will spend it on growth and thereby creating jobs?
Most of them just pay themselves huge bonuses and get richer. A few others may stimulate growth tho but does it justify the cost of an extra budget deficit by cutting the tax rate? We don't really know.
And here's something interesting.
This page is a permanent link to the reply below and its nested replies. See all post replies »
Tax cuts resulting in economic growth is sometimes called Laffer Curve economics and is generally credited to an economist named Arther Laffer (although he claims not to have invented the Laffer Curve).
The validity of that theory has NEVER been proven. The capital gains tax cuts in the early 2000s that G.W. Bush pushed through did not result in any economic stimulus at all. So far, Trump's tax cuts have not resulted in any stimulus. The good economic numbers so far in the Trump administration were already in existence during his first few months in office before his tax cut bill went through.
The Laffer curve assumes that productivity increases as tax rates decline. Most Americans are salaried or wage earners so they are not even in a position to regulate their labor and their pay. So the Laffer Curve cannot possibly apply to most working Americans.
The other assumption is that businesses will increase production as their tax rates go down. This is also dubious. It is possible that a business owner will increase production when his/her tax rates go down but it is also possible that he/she will simply pocket the extra money in tax savings. In the last 40 years, there has been no evidence that any of the tax cuts have resulted in any measurable, sustained, economic growth. It is possible that Laffer Curve economics can work but the jury is still out.
@quitwhendone Its validity has never been proved because it has already been proved to be invalid. The Laffer Curve is bullshit. It didn't work the first two times and it isn't ever going to work.
