Taxes Promote Economic Growth

A countries’ economy that increases its productivity, or total output of goods, would be considered a healthy economy. The increase in productivity equates to a demand for those countries goods. When a countries demand for their goods fall, their productivity will decrease this is referred to as a recession. The Gross Domestic Product (GDP) is the most common measure for total output of an economy. Other key factor such as the unemployment and inflation rate extends the overall view of the economy.
Our country have experience some key tax cuts, the first one in the 20’s followed by the 60’s, Reagan’s tax cuts of the 1980’s and now in 2001, that all have some impressive numbers and data. The 1920 tax cut was the first federal experiment with supply-sided income tax cuts. Economists argue that it takes between 2-6 years for tax cuts to affect the economy. Data in the 1920’s indicate a decrease in federal revenues; however, revenues grew stronger in subsequent years during the economic expansion. The results of the Kennedy-Johnson tax cuts of the mid-sixties displayed similar results.
Ronald Reagan achieved the greatest success during his tax cuts in 1981, which was not approved by congress until October 1981. Reagan inherited a 13% inflation rate, 7% unemployment rate that peaked at nearly 10% and a negative GDP. As in the 1920’s, there was a period of time elapse before the tax cuts proved to be successful. The unemployment rate dropped to 5.5%; inflation subdued to 4% by the time he left office and the GDP leveled at a low 4% average growth rate with the best year being 7% growth in GDP.
President Bush’s tax cuts of 2001 sparked heated arguments in the Senate but was eventually approved and has been endangered of elapsing. In 2001 our economy suffered a major blow from the terrorist attacks, however, the tax cuts in 2001 has affected job growth and our economy. Since August 2003, more than 8.2 million jobs have been created for the past 46 months with an unemployment rate of 4.5%. The GDP since 2002 has been experiencing over 3% growth rate coupled with 5% interest rates.
The data does not lie, in the long-run; tax cuts benefit a capital society by allowing investors to invest in businesses that allow companies to expand their operations by hiring additional employees. A larger work force provides the federal government with an increase in revenues from taxes and social security pay outs. History from a Democratic and Republican President has taught us that tax cuts spur economic growth by placing more money in the hands of the people then a bureaucratic government.