Do tax cuts increase productivity? No
June 16th, 2009 by Sonny
Economist’s View: “Russian Flat Tax Myth and Fact”.
If facts do matter then here’s a study that says the productivity gains claimed by supply-side economics fans are small. Mark Thoma notes:
The lack of a significant productivity response undercuts the main supply-side argument that cuts in taxes produce increased growth in output that generates a partial offset (some even argue a more than full offset) to the revenue lost from the tax cut. So many supply-siders have switched to the compliance argument for the US, but I doubt this effect would be large, and certainly not large enough to pay for the tax cut, and compliance can be increased in other ways such as closing loopholes and better enforcement of existing tax law.
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