Tax Cuts

Dominic Shafer James Bang A09

The article I chose to comment on, “The Double Benefit of Tax Cuts” is from The Wall Street Journal. It was published on Tuesday October 7, 2003 and was written by Gary Becker, Edward Lazear, and Kevin Murphy. My article covers the current issue of presidential candidates and their plans to make tax cuts. In a debate on economics in September 2003, every Democratic candidate talked about rolling back President Bush’s tax cuts. The candidates tried to show that in a time of economic recovery it would be the perfect time to introduce tax reductions, which would help stimulate economic activity over the next year or more. The idea of whether or not a tax cut would help out over a long period of time was not an important issue in this discussion. There were two main ideas behind cutting takes that the candidates talked about.

The first reason they talked about is that a tax cut would make sense is because government spending responds to tax revenues, so that lower revenues imply lower government spending. Just as in a business, the spending by the government is limited by its reven

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He made it clear that higher tax rates cause an increase in unemployment and encourage tax avoidance. It was also pointed out that the government budget equation plays a factor on the revenue. This aspect was Laffer’s Curve* and how it related the tax rate with the revenue from the taxes.

In my opinion the Democratic candidates plan to cut taxes now is perfect.

Overall, the article shows that the points made by the Democratic candidates were very clear. By lowering taxes, there will be higher profits for firms which will stimulate investment and increase wages. In the past, tax cuts have shown the dependence of spending on tax revenue.

Another benefit of a tax cut would be the increased encouragement to work one might have.

The presidential candidates spoke a little bit about past tax cuts but also made the comment that lower taxes would force cutbacks and reforms and then produce a double benefit. It accounts for about 70% of the United States total capital. It is proven that a country that has an increase of human capital, or aggregate supply, will experience high economic growth, as the Democratic candidates stated in the article. In fact, the maximum revenue occurred when the rate was somewhere around 40%. In the 1980’s President Reagan proposed a tax cut that helped promote long-term growth. There will be many benefits to cutting taxes, and there is substantial evidence and reasoning that backs up their plan. These higher wages act as incentive to work harder, increasing the productivity of the economy.

Approximate Word count = 1263
Approximate Pages = 5 (250 words per page double spaced)

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