Can Tax Cuts Grow the Economy Without Government Spending Cuts?

Last week, we asked an important question about Trump’s tax reform plan: Can it deliver?
Despite rampant optimism about tax reform, there are a number of problems. In the first place, it remains uncertain whether or not Congress can even get anything done. Second, as Peter Schiff pointed out, the plan as presented won’t likely create the economic growth it promises.
Peter focused on the fact that the plan isn’t truly reform. It’s tax cuts masquerading as reform. Then there is the issue that it promises to decrease revenue without actually cutting spending and shrinking the size of government. There is strong evidence showing high debt levels retard economic growth.
In a recent article published on the Mises Wire, economist Frank Shostak explains precisely why cutting taxes without accompanying decreases in government spending won’t spur economic growth over the long-term.
President Donald Trump proposed last month a tax plan that would lower the top individual tax rate to 35% from 39.6%. It would also lower the corporate income tax rate to 20% from 35%.

This post was published at Schiffgold on OCTOBER 20, 2017.

 

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