Would cutting taxes help the economy?

Question

I read something for school that said democrats generally want to increase taxes, and that republicans generally want to cut taxes because it helps the economy. How would cutting taxes help the economy? I would think the government would want more money.
clear this up for me.

also, mention if you're a democrat or republican.

Answer 1

The government is a net drag on the economy. Consumers are the ones who drive it. If they've got more money to spend (less taxes), the economy benefits.

BTW, ignore people like ZardoZ. They're living in the dark ages. Check out 'Keynesian economics' and have yourself a good laugh.

I'm a Libertarian. Contrary to popular belief, there's not much difference between a Democrat and a Republican. They both increase the size of government, increase the national debt and harm the economy in their own way.

Answer 2

This depends; will the size and scope of the government increase or decrease? So long as the size of the government increases a tax cut will have a negligible impact on the economy. The problem is that the government has the power to print money at will. When the government prints money, it is a de facto "tax increase" on every human being on Planet Earth who has even one single U.S. Dollar. The reason for this is because when more money is printed the Dollar becomes less valuable (like it is now.) If the size and scope of the government decreases it can definitely help the economy.

This is partly about the allocation of resources. Individuals can more efficiently allocate resources for their own individual needs than a government bureaucracy. You can see your own problems more clearly than some adviser to the President in Washington. When the government spends money on a solution to some problem (whether through printing money, taxation or borrowing from our children) that is money that cannot be spent by you as an individual. Since it is spent by government rather than you, it is spent far less efficiently.

Edit: I am neither a Democrat nor a Republican. I am a libertarian.

Edit: I agree with Koal that it is not the government's money. I am writing from an economic perspective only.

Answer 3

I believe the theory works like this:

If you cut taxes, you leave more money in people's pockets. They will then have three options:

1. Spend it
2. Save it - banks can then loan more money to people to spend or invest
3. Invest it - allows expansion and creates jobs

It is said that government spends money inefficiently compared to the marketplace.

Democrats want to raise taxes to fund social programs as this is their way of attracting votes. Republicans (generally) want to lower taxes to allow more money in the marketplace.

There is data available that indicates that tax revenues actually increase after tax cuts because more money is then in play in the marketplace.

An economist could provide a better explanation (mine is on the simplistic side), but I fail to see how paying more taxes benefit me.

I've often wondered why there can't be a spot on the tax form where people can voluntarily pay more taxes (like the presidential campaign contribution box). Those who feel they should pay more could do so. I suspect that this wouldn't generate much revenue.

Answer 4

almost any study of the overall population shows that less than 20% of the US citizenry understands an inkling of the economy. that being said you are not going to get any real understanding from listening to the people in this site tell you what they read from puff pieces that support their favorite side of the political spectrum.

The fact is sometimes taxes should be raised and sometimes it needs to be lowered. it depends on all kinds of different variables. The economy is so large and complex that most informed economists will tell you you have to change one thing and see what happens, as things change you chage something again and it is not always the same thing you did before that creates the same result.

I suggest taking Macro economics and then if you enjoy it take some Micro classes and learn as much about the inner workings of the economy and not rely to heavily on people who really base their understandings on platitudes.

Answer 5

Yes democrats would like to see more taxes being paid into the system so that there is a socialized system.
Yes republicans would like to see less taxes being collected into the system and that more individuals will become independent and not dependent on the government.
Our government for the record is not very good at being accountable with the taxpayers money.
Such as our Social Security becoming not existant.

Answer 6

Well here is a short version. The theory is that the indvidual will have more money in thier pocket. In turn they will spend that extra money. That extra money is the economy when it is spent as the belief is that someone else gets that dollear and spends it, and again and again so on and so on. The problem is that if your Gov is spending more than it is taking in it increases its debt. This puts your nation in a weaker global position. Also that debt needs to paid by someone. Typically generations latter wwhich ruins thier economy.

Answer 7

its not the governments money, its the electorates. there is nothing wrong, illegal, or immoral, contrary to what the liberal extremists state, about giving consumers more of the fruits of their labors to spend. it creates more economic activity which generates more taxes. until 1914 this country did right fine with NO INCOME TAX AT ALL. and obviously the liberals have perverted it to the 40 percent level on average, well above what was ever intended. my premise is simple. how can making the average consumer self reliant and better off according to what he produces NOT BETTER THE ECONOMY? thats how this country was started.

Answer 8

Spending boosts tax receipts. However, right now the problem is that Americans are spending more and more on credit while actual cash savings are at a low. So while, yes, in the short term the economy gets a boost...in the long run we may be looking at a higher default rate in the middle class resulting in a credit crunch and a depressed economy. This is why the dollar has slipped and the sub-prime mortgage issue has caused so much fallout.

Answer 9

Historically, cutting taxes DOES give the government more money while helping the economy as well.

When you lower the percentage people and businesses have to pay in taxes, they have more money left to spend. When workers spend that money, they buy stuff, which is taxed and turned into revenue. They also invest it, which makes it grow larger and then can have more taxes levied on the gains.

When businesses have more money, they hire more people who in turn pay more income taxes.

Always without fail, when taxes are cut, the economy gets better AND revenue to the government increases with the robust economy.

Answer 10

I'm a Bushitlerrepugniburton.

Tax cuts spur economic growth and, thus, tax receipts. We simply have elected officials who can't stop spending.

One response whines about the AMT, which he blames on Bush. It was actually implemented in 1969, but to a lot of people's chagrin (including mine), it wasn't indexed to inflation.