Do tax cuts really stimulate the economy? In theory, yes. But in reality?

Answer 1

Look at it historically. The top tax bracket in the late '70's was around 70% and the economy was in the toilet. Reagan cut taxes and the econamy launced and grew for wver 20 years afterward.

Answer 2

This is my opinion, purely based on my own observation.
It is known that there are thousands upon thousands of small business owners in the United States. Granted, not all of them rake in multi-millions every quarter, but they are a significant part of the non-corporate conglomerate business world.

Reducing tax rates reduces their tax burden. And where do they get the money to pay their taxes? From their business (whether through compensation, distributions or in effect the business being taxed). Less taxes means potentially more money stays in the business. That means more money to spend, whether it be on employees, products or new developments.

Somehow, I strongly believe that has an impact on local economies which feed directly into the lives of those local people.

Since the Bush admin, there have been a lot of tax cuts and changes. Even those that were only a tax deferral (such as timing of bonus depreciation) still gave business owners an advantage during a very dismal time. And, in my experience, many local companies to me HAVE experienced growth. I believe the deferral and/or offset of taxes has helped with that immensely.

Answer 3

Government deficits stimulate the economy no matter what the reason.The specific effect of tax cuts should have the greatest effect on the behavior of very high income groups since they have the highest tax rates. The historical data on reported income, indicates that tax cuts increase income share for the top 0.1% of the income distribution (income >1 million). It is not clear whether it is because they hide income when rates are high, or because they are more productive (stimulate economy) when rates are low. See graphs at http://visualizingeconomics.com/

Answer 4

Not a firm believer in trickle-down theory (supply-side). They say that if you let rich people keep some of their money, they will invest it. And eventually the economic growth will "trickle down." I dont see that happening. That may have been true in the 80's (which Im not old enough to fully remember)

But its not true now. The rich people are often investing that money in foriegn markets. Therefor, it can not possibly "trickle down."

Answer 5

Leave the poor lady alone Robert. You really have to learn to control your tourettes.