In 1980, Ronald Reagan, the President of the United States, undertook an experimental tax cut program. His belief was that the national government should be smaller, and that the government should do less for the people, not more. …
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As a cornerstone of this program was what was known as supply side economics, or, alternatively, trickle down economics or Reaganomics. This involved making large tax cuts and ending government programs. In the process, while lower taxes on the wealthy, the Congress cut, by 10 percent, the budget for programs which benefit the poor, including food stamps, mass transit, welfare benefits and job training (Reagan, 128). The question is whether this style of taxation should be implemented in Italy. The evidence shows that this method of taxation did not work, as it increased wealth inequality substantially, while doing nothing to boost the overall economy, therefore this method of taxation should not be tried in Italy. The Opposition The opponents of higher taxes on the rich claim that higher taxes would lead to less job creation. The argument is that lowering taxes spurs investment in the economy, and, if the wealthy are overtaxed, they would have less money to spend on employees. This is the theory of supply side economics (Johnston, 1). The motto for supply side economics is that a rising tide lifts all boats – in other words, if the rich are able to be unfettered by high taxes, then their largesse would “trickle down” to the rest of us (Aghion & Bolton, 161). ...
Johnston (2005) shows this to be true. The income for the top .1 percent in 2001 was more than twice the income for the top .1 percent in 1980, even taking into account inflation. During this same period of time, the top .1 percent’s net wealth has grown by 400% in 30 years. When looking at the nation as a whole, the wealth of every household has only grown by 27% during this same period of time (Johnston, 1). Moreover, the taxpayers who have a modest income, by and large, are not able to take advantage of the tax cuts to investments, because most of their stocks are in retirement accounts, which are not eligible for investment income tax rates, in that the money in the accounts are not taxed until they are withdrawn, at which time the higher rates on wages apply (Johnston, 1). While pointing out the wealth disparity, that has grown considerably larger since 1980, when Ronald Reagan was the first president to substantially cut taxes for the wealthy, might seem like a case of class envy, it is not. There are those who are in the top .1 percent, including Warren Buffett, George Soros and Ted Turner, who see the problem with a society in which the wealthy get wealthier, while the poor and middle class see both their wealth and their income stagnate. And that is that this type of society leads to less economic growth. This is because wealth is concentrated in the hands of the inheritors, as opposed to being concentrated in the hands of the strivers and the innovators (Johnston, 1). On the other hand, there is some strength in the claim that tax cuts for the wealthy are beneficial for society, if one believes in the concept of mobility. This is that, in a mobile society, individuals
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“Tax Cuts for the Wealthy: An Economic Boon or Bust Essay”, n.d. https://studentshare.org/english/1487577-the-rogerian-essay.
This research was conducted by using three different models: Reading leads to phoneme detection; Rhyming leads to phoneme detection and reading; Rhyming and phoneme detection have separate connections with the ability to read as well as between the relationship pertaining to phonological awareness and children’s literacy.
This is related with the discretionary fiscal policy which amounts for the periods within recession where government could enhance the highway spending so that it could stimulate aggregate demand. Since it is not mandated by law and is not automatic, the discretionary fiscal policy does bring about measures which help in reviving the economy.
Another way tax cuts help revive the economy is through the supply side channel. A tax cut leads to greater disposable income, thus there is greater incentive for people to work . The greater incentive to work results in greater supply i.e. there is an increase in aggregate supply.
Failure to do so can make the economy face the slump for even longer periods of time. For the US economy, the rate of unemployment was feared to increase to more than 9% by the beginning of the year 2010 due to the lack of a stimulus plan. Also during the year 2009 and 2010, the loss on production was estimated to be more than two trillion Dollars which was calculated as the gap between the actual GDP and the potential GDP of the country.
As profits increase, businesses-both small and big-can expand for greater profit potential. As businesses expand, employment opportunity increases. As more people are employed, more goods and services are bought, thus further increasing profit.
A similar growth occurred under President Reagan's tax cuts which "stimulated a 17-year economic expansion, interrupted only by an eight-month downturn in 1990-91" (Commonwealth Foundation, 2005, n.p.).
Tax cuts, based on original tax provide incentives to individuals and corporations that can further be used to expand investment thus stimulating the economy. The government can then tax the new investments, which are more than the tax cuts, hence more taxable income
Although there are rumors suggesting that tax cuts could result to a long-term budget deficits, economists during the Bush administration strongly believe that implementing tax cuts is sufficient enough to stimulate investment and public spending
According to Elliot, an economist working with the Conservative Way Forward, this prompted the American government to institute tax cuts so as to reduce the tax burden that citizens and foreign investors had to bear as a way of encouraging investment (Elliott, Sinclair &
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