THE MYTH
Do tax cuts stimulate the economy?
Yes. Tax cuts allow people to keep more of their own money therefore they have more to invest and spend into the economy and more money to start business and create jobs therefore also helping to stimulate the economy
Yahoo Answers
I think when people take a look back at this moment in our economic history, they'll recognize tax cuts work. They have made a difference.
George W. Bush
THE REALITIES
The brute facts are these:
Large income tax cuts are followed by a bubble and then a crash.
High income taxes correlate with economic growth.
Income tax increases are followed by economic growth.
Moderate income tax cuts are followed by a flat economy.
All this is especially true as applied to the top tax rates, the amount paid on income that exceeds the highest bracket.
THE THREE GREAT TAX CUTS: BOOM, BUBBLE, CRASH
1. HOOVER
During World War One the top marginal tax rate went up to 73%. Not the highest ever, but pretty high.
In 1922, a series of rate cuts began. Down to 56%, 46%, and finally, in 1925, it went down to 25%.
The stock market took off. There was a boom. But the boom was a bubble.
It was followed by the Great Crash of 1929.
There were bank failures and the Great Depression.
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