Supply Side
Is the belief that the AS curve will determine levels of inflation unemployment and economic growth. To increase the economy the AS curve should shift to the right which will always benefit the company first.
Focus on marginal tax rates (which are the amount paid on the last dollar earned or on each additional dollar earned)
By reducing the marginal tax rate supply siders believe that you will encourage more people to work longer and forgo leisure time for entra income. Support that help GDP growth by arguing thay the high tax rate and current system of transfer payments provide disincentives to work, invest, innovat, and undertake entrepreneurial ventures.
By reducing the marginal tax rate supply siders believe that you will encourage more people to work longer and forgo leisure time for entra income. Support that help GDP growth by arguing thay the high tax rate and current system of transfer payments provide disincentives to work, invest, innovat, and undertake entrepreneurial ventures.
Reagonnomics
-Lowered the margial tax rate to get the US out of a recession.
Lafer curve it is a trade-off between tax rates and government revenue. Used to support supply side argument.
3 criticisms of Lafer Curve
- Research suggests that the impact of tax rates on incentives to work, save and invest are small
- tax cuts increase demand which can fuel inflation and cause demand to exceed supply
- where the economy is actually located on the curve is difficult to determine
- tax cuts increase demand which can fuel inflation and cause demand to exceed supply
- where the economy is actually located on the curve is difficult to determine
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