A report from Brookings: “Effects of Income Tax Changes on Economic Growth.”
Brookings has an interesting white paper about how changes to the individual income tax affect long-term economic growth.
The structure and financing of a tax change are critical to achieving economic growth. Tax rate cuts may encourage individuals to work, save, and invest, but if the tax cuts are not financed by immediate spending cuts, they will likely also result in an increased federal budget deficit, which in the long-term will reduce national saving and raise interest rates.
The net impact on growth is uncertain, but many estimates suggest it is either small or negative.
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