How can tax cuts help revive the economy
Tax cuts can help revive when applied in some sectors such as National Insurance. Cutting taxes towards jobs will create employment. Employment is one of the parameters of determining the economy. When most people are employed, there is equal income generation. This improves the purchasing power thus improving economy. Income tax is taxes charged on employed people. Increasing income tax and most for those earning more, affects the economy. This is because entrepreneurs are discouraged by the move of increasing income tax. Entrepreneurs are very vital in an economy. In order to encourage entrepreneurs income tax should be reduced.
Tax cuts ensure more money circulation. This means that people have more money in their pockets which increases the aggregate demand of goods. The demand of goods is determined by the amount of money one has. Tax cuts increases the amount of tax collected through taxation. This is because all people would be willing to pay tax. It has the trend of rich people to dodge from taxation. This would not happen since when taxes are reduced no one will feel the weight.
Tax cuts may either be good or bad based on what is perceived to be achieved. Tax cuts will also be determined by the economy status. Tax cuts can be introduced selectively to both the lower and middle classes. Government expenditure can be increased by participation in public issues such as education and health care. Reducing taxes for both the middle and lower classes implies more money within their vicinity. Consumption depends on income generation. Having more money means getting more goods which were not affordable. Buying more goods means increase in Gross Domestic Product which is a parameter of good economy.
Tax cuts favor small businesses which are the strongholds in an economy. Reducing taxes means reduced inputs in small business. This raises the number of small businesses thus stimulating the economy. Tax cuts increases job creation by ensuring favorable working environment. Economic growth depends on adequate flow of goods and services. It does not depend on existing goods and services. The production depends on the support provided towards final goods and services. This defines the funding done towards production. Most firms depend on savings to purchase consumer goods. Money in the real essence controls the flow of goods. This is ensured by implementing tax cuts.
Taxation is major source of revenues to the government. The government uses the money collected from tax to pay its workers. The government affects wealth generation by taxing employed people. Economic revival is normally affected since people do not have money to purchase what they do not have. Loose fiscal policy leads to economic revival as everybody can purchase what heshe wants. In conclusion, tax cuts ensure continuous flow of final goods.