whatever said:
Except there is no way to prove if the tax cuts had anything to do with unemployment decreasing until the crisis. It could have been due to many other factors. |
This is the kicker with the knee jerk reaction of "cut taxes" whenever there are economic issues about. As was seen in this thread, the response to why unemployment rates are not dropping is said for other reasons besides tax cuts. And this is valid. And yes, tax cuts can THEORETICALLY cause unemployment to drop in a country, IF certain things happen. But there is no guarantee. One also would have to ask if tax cuts are the best way to get a bang for the buck. Or, are there greater needs afoot that maybe tax dollars should be used. Like, say there is a state in total collapse, without a functioning legal system, or courts, and no way to uphold property rights. Would this generate any economic activity? Nope, not really much outside of barter. So, if you start to collect taxes, you can cause the conditions to change, because you can afford to pay for police.
Beyond this though, and this seems to get skipped in the debates about tax cuts or not, is that economies grow naturally, and people should become employed EVEN IF THE TAX RATE IS UNCHANGED. This should be true, if a business can make profits hiring workers. The workers are an expense. In America, all expenses connected to workers, barring unemployment insurance and matching for social security, are covered and able to be written off their taxes. What matters is the nation as a whole can have sufficient economic activity so that the business can justify hiring more workers. Is it profitable to do so is what a business asks.
