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Tax cuts often provide a stimulus to the economy, because they reduce the cost of doing business and allow ordinary citizens to spend or save or invest more of their own money. They give incentives to work, save, and invest, thus creating jobs and increasing economic growth. ://

When tax rates have been raised beyond the point of diminishing returns cutting a tax rate will result in a net increase of tax revenue. This may seem paradoxical but can be easily explained by the fact that lowering taxes can stimulate the economy. The best example is the tax on capital gains. This phenomenon is described by the Laffer curve, which “illustrates the trade-off between tax rates and tax revenues.”<ref name=laffer-ppf />

Laffer wrote:


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See also:

Economic Stimulus Taxation

Snippet from Wikipedia: Tax cut

A tax cut is a reduction in the rate of tax charged by a government. The immediate effects of a tax cut are a decrease in the real income of the government and an increase in the real income of those whose tax rates have been lowered. Due to the perceived benefit in growing real incomes among tax payers, politicians have sought to claim their proposed tax credits as tax cuts. In the longer term, however, the macroeconomic effects of a tax cut are generally not predictable because they depend on how the taxpayers use their additional income and how the government adjusts to its reduced income.

tax_cuts.txt · Last modified: 2020/03/12 18:39 (external edit)