Taxes And The Economy : Maximizing Economic Growth

2213 WordsDec 5, 20149 Pages
Taxes and the Economy - Maximizing Economic Growth Today the subject of taxes and economic growth has become a politically heated debate in the press, congress, and advocacy groups. These debates are created in part because there are many different theories about what drives economic growth. Groups often refer to the Neo-classical, supply-side factors, others the Keynesian demand-side factors, and still others refer to a mixture of the two or something completely their own. Arguing over a current theories ability to maximize growth is extremely difficult. However, looking at historical fiscal policies and decisions made definitely sheds much needed light on the debate. It is important to remember that the U.S. economy is infinitely…show more content…
All of these problems allow the study to be references in economic theories, but it is not publishable in any academic journals. [2] After arduous research looking to find how taxes affect economic growth, the results are overwhelming. After fully vetting each source, and making sure that it properly addresses the question being asked without making information leaps, a conclusion is easy to realize. In the long term, economies that reduce taxes enjoy increased growth and higher GDP compared to economies that increase taxes. Despite all of the political rhetoric speech today, once the historical facts are dug up, it is simple to see that the trick to reducing debt and reaching fiscal austerity is to lower taxes as a higher GDP will ensue along with increased growth. Of the 13 sources found, all of them support the notion that there is a definite negative correlation between taxes and economic growth. In the studies chosen controls were created to include other factors such as business climate conditions, monetary policy, and government spending. Of the studies selected, the ones that distinguished between the types of taxes proved to be the most beneficial. The ones that focused on personal income taxes, consumption and property taxes followed closely behind. The research provides a framework for an argument to be created. The research supports the Neo-classical economic perspective regarding taxes and wealth. To be more clear, the
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