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