Tax cuts do raise the deficit

Reader comment on: Mother Jones Calls for a Tax Cut Stimulus

Submitted by benjamin (United States), Jun 9, 2010 21:05

This is a proven fact. Economists of all stripes, even "supply siders" think that tax cuts raise deficits. The disagreement is more about the degree. Does one dollar in tax cuts raise the deficit one dollar, no because of increase revenue. But does a dollar in tax cuts actually bring in more than dollar in tax revenue because of growth? Only the outer most fringe of economists think this. Leonhardt is only conveying mainstream economic theory. Of course, the better way (politically more difficult of course) is for the government to spend directly. Then every dollar in stimulus actually goes gets spend and circulated, as opposed to a payroll tax cut which many people will throw in their savings accounts and not spend. If Obama's original stimulus hadn't included the tax cuts that made up almost 40 percent, we would be in a better place than we are now.

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The Future of Capitalism replies:

Depends on the tax being cut. It's pretty clear, for example, that cutting some capital gains tax rates increased capital gains tax revenue, at least short term.

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