Are Tax Cuts Promoting Economic Growth Essay Example | Topics and Well Written Essays - 500 words

Are Tax Cuts Promoting Economic Growth - Essay Example And the same thing can be seen happening with President Bush's 2003 tax cuts since 2003 annual GDP has increased by 4.3% as opposed to the 2.4% during the two years preceding. There can, however, be a downside to tax cuts. If the taxpayers save their increased income or buy outsourced commodities, the government may have to deal with balance of payments difficulties that could cause a deflationary effect leading to a "budgetary crisis with a painful readjustment to follow" (Wikipedia, 2006, n.p.). But how many people do you know bother to put their tax returns into savings or shop overseas Of course, you can buy almost anything from anywhere on the Internet, so the downside might be all too accessible these days. An alternative to cutting taxes is to increase minimum wage. Of course, that comes with its own share of downsides; mainly, the same downsides that tax cuts have. While researchers could find "no statistically significant relationship between minimum wage rate increases and business failures" (Rendell, 2006, n.p.), it is still no better than tax cuts and prone to the same downsides. So, when in doubt, cut taxes. Of course, doing both simultaneously could produce some interesting results.