Does reducing taxes generally lead to better economic performance? Does it lead to slowdowns in the economy?

  • 3
    $\begingroup$ Is the budget being balanced? I.e. once the state reduces taxes it probably has to reduce spending. What kind of spending it reduces probably has a role in determining 'economic performance'. $\endgroup$
    – Giskard
    Sep 5 '16 at 6:30
  • $\begingroup$ Tax reductions often have both macro and micro effects. You might consider adding the 'microeconomics' tag. $\endgroup$ Sep 5 '16 at 15:24
  • $\begingroup$ You can look at "Laffer Curve". $\endgroup$ Nov 23 '16 at 14:23

It is much more complex than just saying yes. You need to look at different factors and then you can answer your question.

Generally, high taxes have a negative effect on businesses, the more taxes a business pays - the less money it has to growing itself.

The lower the taxes the less money the government has (this is not necessarily as there is a Laffer curve to take into consideration).

It also differs depending on how you measure economic performance, GDP? GNP? job growth, unemployment rate - these are all very different.

If you look at most major economies - you will see that generally the lower the taxes, the better the economy performs. However there are many countries - such as the Scandinavian Social democracies, that have high taxes but generally good economies.

In my opinion, high taxes are not a major factor in economic performance (although they are a factor), and Free market and less regulations is much more important. Simplifying tax code is also more important than lowering taxes, as complex tax codes are waste of time and money.

If the taxes are low, the budget is balanced, and the tax code is simple - it is generally better than the same economy with higher taxes.


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