How would a federal income-tax cut affect our current economy?

Question

Hi guys i have this economics question and i just need a second opinion. "how would a federal income-tax cut affect our current economy? (Be sure to consider both negative and positive aspects of a tax cut.)"

Positive - More money for people
- would encourage business growth
- with more businesses more people employed...??

Negatives - Might cause inflation if demand exceeds supply

Thats all i can think off, i think they are all right, but can anyone tell me if they are correct and add a few more as well. I really need a couple more for the negatives.

Thanks!

Answer 1

Well, let's see. The current administration cut taxes early on and kept cutting. Even during wartime -- a first in the history of the nation. We had a surplus when Bush was handed the White House and now we're about $7 TRILLION in the red. So you tell me.

It is possible to use CAREFUL application of tax cuts to help stimulate a flagging economy. But what we have seen over the past 7 years is anything but CAREFUL. The current administration doesn't give a monkey's butt about it since they won't have to solve the problem. Whoever is elected in '08 will inherit the worst fiscal mess in the history of the nation.

Answer 2

Your answer appears alright to me, especially if the tax cuts include domestic corporations.
You may want to consider adding to the negatives--
1. Possible reduction in federal budget expenditures, would increase unemployment in selective industries.
2. Possible heavy revenue reduction in corporations and stockholder value that have major exposure in government contracts.

Let's face it is not the federal deficit that is our biggest economical threat, but the trade deficit and the value of the American dollar. And it is a falsehood that the national debt to percent of GNP has been less than 30 % over the last 60 years.

Answer 3

It relies upon on how the government financed the tax shrink. If it exchange into paid for by utilizing spending cuts it would in all probability motivate company enhance. If it exchange into financed by utilizing kinfolk borrowing it would compete with companies for money, enhance expenses of activity and sluggish investment. If it exchange into paid for by utilizing increasing of the money furnish it would enhance inflation yet reason a non everlasting growth. If it exchange into financed by utilizing foreign places investors, it would improve the financial gadget interior the fast term, yet weaken it over the long-term.