Overview
There has been discussion about whether the Tax Cuts and Jobs Act that took effect in 2018 is increasing tax revenue. Tax revenue can be thought of as an average tax rate multiplied by taxable income. If the average tax rate falls while taxable income stays the same, tax revenue will fall. But what if the tax cuts increase taxable income? The major schools of thought in macroeconomics (Keynesians and Neoclassicals) believe that tax cuts increase economic growth. Economic growth increases taxable income. Our economic growth before the pandemic brought unemployment down to historically low levels.
- Start your discussion by responding to these questions:
- Do you think that tax cuts increase economic growth and taxable income so much that tax revenue increases?
- Or do you think that tax cuts reduce tax revenue? Explain your answers.
- Be sure to respond to at least one of your classmates' posts and share your thoughts about their opinions.
Also respond to this classmate:
Hello everyone
I think that tax cuts would help to increase economic growth. Tax cuts on taxable income generate more money coming into your household. Which in return leads you to spending more money on goods and services. Being able to spend more money on goods and services helps to increase growth in the economy. I also feel that by cutting taxes on your income that the government is going to make it up somewhere else to still increase the tax revenue. That somewhere else will be with your goods and services that you are spending your money on. Taxes can be cut in one area to help stimulate economic growth, but it can also be raised in other places to cover the short fall of the reduction.