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tax cuts create an incentive to increase output, employment, and production
Often 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 states there exists a point when increasing taxes actually decreases tax revenue.
Often 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 states there exists a point when increasing taxes actually decreases tax revenue.
Laffer wrote:
* Because tax cuts create an incentive to increase output, employment, and production, they also help balance the budget by reducing means-tested government expenditures. A faster-growing economy means lower unemployment and higher incomes, resulting in reduced unemployment benefits and other social welfare programs. [http://www.heritage.org/Research/Reports/2004/06/The-Laffer-Curve-Past-Present-and-Future]
[[Category:Economic Stimulus]]
[[Category:Economic Stimulus]]
[[Category:Taxation]]
[[Category:Taxation]]