Do tax cuts increase tax revenues Essay Example | Topics and Well Written Essays - 500 words

Do valuate cuts increase tax revenues - Essay Example1). This measure has led to increased investment and job creation in the American market over the past few years.Cutting taxes may lead to increased or decreased revenue depending on the duration in which the tax cuts are applied. During an economic boom, an increase in taxes leads to increased revenue for a country. A tax increase may, however, harm the economy in the longsighted run as people may feel the burden imposed on them and shy away from doing affair in the country as noteworthy by Sowell (2012, p. 7), an economist and senior fellow at the Hoover Institution Stanford University Stanford, . This implies that increased taxes will increase revenue in the short run and decrease revenue will do so in the long run. For instance, when President Clintons administration got rid of trade tariffs on Chinese goods, the American market were flooded with Chinese goods. This led to an increase in business and consequently tax reven ues increased. However, taxes paid by Americans increased to a level that many an(prenominal) another(prenominal) of them got discouraged from risking their money in business. This led to a recession which the American economy suffers to-date.When taxes are low, many people do not feel the tax burden and are, therefore, encouraged to risk their money in business and are encouraged to comply with tax laws (Hungerford 2012). If many people invest in business and earn dividends, they will contribute a lot in revenue to the economy as opposed to if fewer people were involved (Sowell 2012, p.5). With a get off tax burden, people grow richer faster and consequently move to a higher tax brackets which mean increased revenue for the government. Furthermore, when more people invest, many of them grow richer and consequently pay more taxes which translates to more revenue. A specialist in public finance, Hungerford notes that the revenue generated by an economy that has lower tax rate is o ften much higher than that that generated by higher tax rates (Hungerford 2012, p. 15).