Tax Policy: Does Cutting Taxes Cure All Ills?

Cutting taxes is expensive, as every person or company is eligible for the tax if they meet certain conditions, regardless of whether they make use of that extra money. Some tax breaks can create significantly more economic activity but many others do almost nothing to improve the economy. The distribution of income is a major player in the effectiveness of tax policy. If the tax cut does not make economic sense, it simply becomes a way to redistribute income, not a way to expand growth. The purpose of the tax cut is to generate more spending on the part of either households or businesses. However, not all tax cuts actually generate very much additional economic activity. If they don't, there are still some people or businesses that have more money but the economy does not grow very much as a result, and tax revenues fall, expanding the budget deficit. Only those taxes should be cut that create the most additional economic value and do not send negative messages to certain groups or businesses.