Jim Hlavac
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Economic Theory
| Economic Theory |
Supply side economics is a theory which holds that if we lower taxes
and lessen regulation to encourage more supply then we can make the
economy grow. The rationale given by supply siders is that this will
make government revenues grow because of the increase in wealth
generated will result in more taxes paid.
It is true that lessening regulation will get more people to do more
economic activity and thus there will be more growth. However,
lowering taxes per se, doesn't create "new" wealth -- it merely allows
people to keep their hands on more of what they produced. The
amount of money given in the tax cut would have been there anyway --
it was merely transferred from the government back to its rightful
owners. No new wealth though is necessarily created.
If every person receiving a tax cut put the money under the
mattress there would be no new economic activity whatsoever. If the
government kept the money they would still have spent it on
something. The spending would have been in different things, but the
money would be spent. A tax cut is always good because the people
have a right to their money, and the government only has a claim of
wanting some for certain cooperative societal goods.
and lessen regulation to encourage more supply then we can make the
economy grow. The rationale given by supply siders is that this will
make government revenues grow because of the increase in wealth
generated will result in more taxes paid.
It is true that lessening regulation will get more people to do more
economic activity and thus there will be more growth. However,
lowering taxes per se, doesn't create "new" wealth -- it merely allows
people to keep their hands on more of what they produced. The
amount of money given in the tax cut would have been there anyway --
it was merely transferred from the government back to its rightful
owners. No new wealth though is necessarily created.
If every person receiving a tax cut put the money under the
mattress there would be no new economic activity whatsoever. If the
government kept the money they would still have spent it on
something. The spending would have been in different things, but the
money would be spent. A tax cut is always good because the people
have a right to their money, and the government only has a claim of
wanting some for certain cooperative societal goods.