Income tax increase?

Question

Both of our last 2 presidents, George Bush Sr. and Bill Clinton, advocated increases in income tax rates for upper middle class income taxpayers. Both justified the tax hikes by claiming they would lead to lower interest rates. How can an increase in taxes lead to lower interest rates?

Answer 1

An increase in taxes wold lower the federal deficit. This is turn would cause less government borrowing, leading to less upward pressure on interest rates.

Answer 2

It's an inflationary device. Higher taxes mean less disposable income and less likely to finance. When less money in circulation, the fed will lower interest rates to spur more spending. Its cyclical and a never-ending battle.