How do tax cuts affect the economy?

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Tax cuts improve the economy by giving the people more spending power and higher consumer confidence which leads to them spending more of all of their income which leads to more jobs, more business investment in more efficient technologies, and ultimately higher GDP growth. Less is more Lower taxes, when coupled with lower or controlled government spending, almost always has the opposite effect of what most people would think. Increased government revenue is one almost immediate symptom, as the tax cut encourages people to buy more products and services, stimulating the economy and creating more jobs. Less taxes (as a percentage of earnings) going to the government coffers and more staying in the pockets of average taxpayers always has a positive effect on the overall economy and allows a vibrant free democracy to thrive and grow. Remember that money the government uses to spend is not their money. It is the people's money that they take from us through various taxes. Lower taxes on the manufacturing, service and business sectors allows them to spend more money on their business and create more jobs. More revenue through taxes as a result of this increased commerce allows the government to maintain or even increase spending on precious social programs and health care. The resulting increased revenue allows a responsible government to borrow less money or even reduce government debt, relieving pressure on currency supply and interest rates, resulting in lower interest rates, which is good for everyone. Lower tax rates are a classic case of 'less is more' and any good government should always be searching for ways to reduce taxes and spending. It's your money.   However, some disagree on the effectiveness of this measure. Sometimes, the benefits are eaten up by a rise in prices, like the rise in oil prices during the Iraq wars. Other times, the benefits don't extend to all social classes or the benefits disappear after a short time. All tax cuts should be thoroughly researched as to their specifics.


  Forget the meme that tax cuts stimulate employment. I can assure you it's not true. Most of the revenue from a tax cut winds up with the rich, and they invest in stocks purchased from other rich people far more than they spend on consumer goods.
It would be easy to argue that a tax increase would benefit the American people as a whole more than a tax cut. Get yourself a good old-fashioned tax and spend liberal and he's going to spend on things like increased road construction. They'll have to hire to do it, and the people who were hired spend their money in the stores. IIRC a dollar turns over in the community seven times...so a billion-dollar tax increase earmarked for highway construction becomes a seven-billion-dollar boon to the economy.


 Answer

Because of some people taking loans, using there credit card for almost everything, and burrowing money from friends and families, is one of the main reason's why the economy is acting like a holler coaster. Back in WW1 and WW2 War bonds kind of helped the economy and our nation because we the tax payers give are money to the government to pay for war and small stuff and we get that money back after the war is done and the bond is done, plus we get an interest rate of each year. There was a new bond after 9/11 but there was no advertisement about it, so our government had to borrow money and make loans from other countries and third party countries, which they owe an additional interest rate to those people of the loan. That is the same for civilians. I hate to say it, but allowing the tax cuts to expire will help our economy in time and hopefully but the time our economy is truly back on our feet, then we can make new tax cuts proposer. I plan to never get or use a debit card or make a loan, which is dependent on how much you get paid, because if you know you can't pay for something that is expensive then just save your money in the back and use the savings' account increase money from the interest rate, then you can use that to buy something expensive. I suggest just you cash from your checking or savings account or your debit card. Only use your Credit card and loans in emergency use only.


This is such a bogus economic theory with no substantive proof.

The key phrase is "lower taxes coupled with lower government spending". No republican administration in the last half century has ever reduced government spending, even when they did cut taxes. What proof can there be when there is no data to support the "theory" that reducing taxes has a positive impact on the economy? What if the increased spending by government was the the real reason for the improvement in the economy. Economist can only give us opinion on the subject but not facts supported by data. Where is the proof that the manufacturing companies really create jobs because they have lower taxes? With sending jobs out of our country we have allowed the wealthy manufacturers to keep more of their money without investing in this country's economy. Once the initial logic falls apart, the rest of the argument for lower taxes crumbles.


The real beneficiaries of the lower taxes issue in the last half century have been the rich. Both political parties have contributed to the increasing disparity between the rich and the middle class in this country. Read the following article.  The New American Oligarchy  Thursday 02 December 2010by: Andy Kroll | TomDispatch | Op-Ed

Secondly, the lower taxes mantra, most recently, ignores any sense of civic responsibility and encourages the "me now" syndrome. "Now" means give me the benefit of lower taxes today regardless of the cost I pass to my children. Our founding fathers put their entire livelihood and fortunes on the line for the benefit of society. That does not exist today.
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How does one's economy be affected by interest rates hike or cut?

because when the interest rate goes up means there is a good economy and banks making money. when the interest rate is low banks are lossing money so they out it down to get a

What do tax cuts do?

put more money back into the pockets of people who pay tax, before the tax rate cut was introduced.

How can tax cuts revive the economy?

Tax cuts can be a good thing or a bad thing depending on what you are trying to accomplish and the state of the economy at the time. If you have an economy like we do today yo

How does tax cuts help economy?

the less tax we have to pay the more money we will have so we tend to spend more which helps our buisnesses grow which keeps our economy going

How does it affect economy?

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In Taxes and Tax Preparation

Should you increase taxes or cut taxes?

This is a politically charged subject, so this is highly debatable. But, I will tell you it is generally more helpful to cut taxes in a recession and raise taxes in an infla