Tax Cut
Tax cuts, also referred to as tax deductions, loopholes, or credits, are reductions to the amount of citizens’ money that goes toward government revenue. Congress can cut taxes on income, profits, sales, or assets. They can be a one-time rebate, a reduction in the overall rate, or a tax credit. Often in many forms, these cuts constitute a decrease in the real income of the government and an increase in the real income of those whose tax rates have been lowered. Advocates of tax cuts argue that reducing taxes improves the economy by boosting spending.
Tax Cuts May Increase Spending & Stimulate the Economy
- This is a controversial topic
- Some think tax cuts help invigorate the economy
- Taxpayers will spend the money saved - stimulates economy, generates jobs and generates more tax revenue for the government
- In reality, it depends on who receives the cuts
- If tax cuts go to those with a higher Marginal Propensity to Consume (MPC), tax cuts will likely generate additional spending
- If tax cuts go to those with a lower MPC (generally the affluent), tax cuts won't generate as much additional spending
- When they work, the impacts usually tend to be temporary and only give a 1x boost