I am inclined to think that in a country like the USA where tax compliance is a more than respectable 83%, there is less sense in reducing tax rates in an effort to increase tax revenue through hoping for a higher tax compliance, and simultaneously to stimulate the economy by leaving more money in the hands of people hoping that they will spend some of it and stimulate the economy. So, apart from the occasional stimulus checks, expansionary monetary policy remains the only significant tool for stimulating the economy when required. Am I right in thinking in this way?
If I am right, does it imply that in an economy where tax compliance is low, fiscal measures such as reducing tax rates and improving tax compliance should be tried out before lowering interest rates? I ask this because lowering tax rates in low tax compliance countries (<20%) could increase tax compliance thus leading to increased tax revenues. This paper seems to substantiate this view through the Laffer curve mechanism. The Laffer curve is an inverted U-shaped curve of tax revenue against tax rates that indicates that there is an optimal tax rate at which tax revenue is maximized and this optimum can be achieved at times through lowering tax rates that encourage tax compliance. Lowering tax rates when tax compliance is low would leave more money in the hands of people who already were paying taxes, and a less than previous but still a reasonable amount of money in the hands of people who were earlier tax non-compliant. This should stimulate the economy through increased spending, as well as leave more money in the hands of the government for government spending.
If what I have written above makes sense, does it then make more sense to exhaust all fiscal tools and ensure as high a tax compliance as possible even at the expense of reducing tax rates before turning to monetary policy to stimulate the economy? Why induce people to assume leverage when they can be taxed less, can be made more tax-compliant, and can be induced to spend more through letting them have more disposable income (at least for the ones who already were tax-compliant)?