Tax Cuts Research Paper 2
Introduction
The paper will discuss the concept of public financing, where taxpayers and decision-
makers responsible for determining spending levels are distinct. It mentions how the United
States was initially founded on principles of faith, with early decisions rooted in religious
considerations. The Constitution grants the federal government the authority to tax, outlining
obligations when imposing taxes. It explains the structure of the US government across local,
state, and federal levels, highlighting various functions like legislating, executing laws, and
judiciary. Taxes take diverse forms such as income, sales, and property taxes, serving as a civic
duty and legal requirement. Failure to pay taxes can lead to penalties enforced by agencies like
the IRS. Tax revenues contribute to funding government salaries, public services like police and
firefighters, infrastructure maintenance, libraries, parks, and various welfare programs assisting
the disadvantaged and educational institutions. In our text, Rubin highlights the importance of
holding those in power accountable when taxpayer money isn't used as expected. It mentions the
frustration among Americans regarding perceived waste, mismanagement, and unequal tax
burdens (Rubin, 2017).
Laffer Curve & Supply Side Economics
Laffer Curve
The Laffer Curve, introduced by Arthur Laffer in 1979, suggests that lowering tax rates
can stimulate economic growth. It explains how changes in tax rates impact government
revenues in two ways: immediate and longer-term effects. The immediate effect, termed
"arithmetic" by Laffer, suggests that tax cuts directly reduce government revenue. Conversely,
the longer-term "economic" effect posits that lower tax rates increase consumer spending and
Tax Cuts Research Paper 3
business activity, leading to economic growth, job creation, and ultimately expanding the tax
base, which could offset the initial revenue loss from tax cuts (Pettinger, 2018).The Laffer Curve
suggests that as tax rates increase, tax revenues initially rise as well. However, this trend only
continues until reaching a peak, after which further increases in tax rates lead to diminishing tax
revenues. In other words, there's a point beyond which raising tax rates becomes
counterproductive.
Supply Side
The late seventies saw the emergence of "Supply Side Economics," advocating for lower
tax rates to enhance private sector incentives, leading to increased employment, productivity, and
output in the US economy (Roubini, N, 1997). George Bush initially criticized an extreme
version of this theory, referred to as "voodoo economics," which predicted that tax cuts would
boost tax revenue and not increase the government deficit, known as the Laffer Curve effect
(Roubini, N, 1997). Supply-side economics promotes incentivizing businesses through
deregulation, allowing for expansion and exploration of new growth opportunities. Corporate tax
cuts are seen as a means to provide businesses with more resources for hiring, investing in
capital equipment, and increasing production.
An income tax cut incentivizes workers by increasing their earnings per hour worked,
encouraging them to stay employed, thus boosting the labor supply and consequently promoting
economic growth. Supply-side economics, akin to trickle-down economics, posits that benefits
for the wealthy will trickle down to all levels of society. It asserts that investors, savers, and
company owners are key drivers of growth and that they will utilize additional funds from tax
cuts to expand businesses, invest in operations, and hire more workers. Proponents argue that the
resulting economic growth will compensate for any reduction in tax revenue. Additionally,
Tax Cuts Research Paper 4
supply-side economists contend that high marginal tax rates discourage income, output, and
efficient resource utilization (Gwartney, 2008).
Contemporary Tax Cut Proposals
The term "contemporary" refers to something belonging to or happening in the present.
The text reflects on the irony of seeking the textbook definition of contemporary and finding a
poignant example: "The tension and complexities of our contemporary society." It emphasizes
the truth in this description, highlighting ongoing struggles with growing deficits. Despite these
pressing issues, discussions about deficit reduction often take a back seat to debates over
political performance and popularity among politicians.
Some of the primary contemporary proposals center on traditional right-wing principles.
These proposals advocate for significant reductions in corporate taxes and taxes for wealthy
individuals, based on the belief that benefits for the affluent will trickle down to lower-income
groups. Additionally, elements within proposed bills in both the House and Senate could
potentially restrict states and local governments from imposing their own taxes, leading to
pressure to reduce spending on crucial areas such as healthcare, education, public transportation,
and social services. For Republicans, the tax bill serves as a means to advance their long-
standing goal of shrinking the government, extending their battle beyond Washington
(Goodman, 2017).
As the mid-term elections approached and Republicans faced challenges, President
Trump campaigned for GOP candidates nationwide, pledging tax breaks not only for
corporations and the wealthy but also for the middle class. He directed Republican lawmakers to
craft a plan specifically targeting the middle class, but specifics regarding which tax brackets
Tax Cuts Research Paper 5
would see lower rates or if the package would include enhanced deductions remained unclear.
This lack of detailed information makes it difficult for constituents to make informed decisions
about who to vote for and entrust with representing their interests.
The political landscape, especially concerning tax cuts, is highly charged and contentious,
with parties fiercely debating which tax policies are beneficial for the nation's well-being and
their own political agendas. While taxes are crucial, the intense focus risks overshadowing other
pressing issues. Some argue against immediate tax cuts, citing potential harm to government
revenues and the economy. Critics point out that promises of economic miracles through tax cuts
have been consistently debunked. This fixation on tax cuts detracts from addressing significant
societal challenges, including economic disparities exacerbated since Trump's presidency.
There's a call to heed Senator Lee's suggestion that the government's structure was designed to
prevent excessive spending and accumulation of power, prompting discussions about prioritizing
a balanced budget amendment (Lee, 2011).
Throughout history, various tax rates and breaks have been implemented, but none have
led to a significant change in addressing issues like the massive deficit, which now stands at
fifteen trillion dollars. Darlin's article illustrates how top tax rates have fluctuated over time, with
notable cuts during the administrations of Coolidge, Harding, Kennedy, and Reagan (Darlin,
2017). Despite these reductions, the ongoing debate persists regarding the allocation and
management of government funds. The inability to reach a consensus on what's best for all,
coupled with intergenerational concerns, reflects a lack of unified action. Instead of collaborating
to address these pressing issues, there's a tendency to blame others, leading to continued finger-
pointing until the problem reaches critical levels.
Tax Cuts Research Paper 6
Tax Reform Issues
True tax reform proposals must address fundamental issues within the tax structure
(Rubin, 2017). When taxes are utilized for political gain, funding allocations become
imbalanced, with certain programs receiving excessive funding while others suffer. Poorly
designed tax structures exacerbate these disparities, particularly during recessions or periods of
rapid revenue growth, necessitating reforms to restore balance. Achieving tax reform is
challenging, especially if it maintains revenue neutrality or doesn’t increase the tax burden on
individuals. Despite potential success, tax reforms often face opposition from lobby groups
representing those adversely affected by the proposed changes.
When citizens demand a change in taxation, it doesn’t always lead to reform. Not all
alternations to the tax system should be considered reforms; simply cutting taxes may not
constitute reform, especially when driven by fiscal stress rather than strategic overhaul Rubin,
2017). Tax reduction may qualify as reform if a government perceives its tax structure as
competitively disadvantaged compared to others. Achieving tax reforms is typically more
challenging than implementing tax increases. Successful reforms often focus on maintaining
revenue neutrality rather than solely adjusting tax rates.
Christian Worldview Analysis
The passage from Romans 13:6-7 instructs believers to fulfill their obligations, including
paying taxes, as authorities are appointed by God. This underscores the importance of
responsibility and respect as citizens. While the Bible doesn't directly address tax breaks or cuts,
it emphasizes principles of avoiding indebtedness and theft. Christians are encouraged to love
one another and practice generosity, while also adhering to principles of justice and wise
Tax Cuts Research Paper 8
References
Darlin, D. 2017. Trump's tax cut won't be the biggest in U.S. history. Retrieved From:
https://www.reuters.com/article/us-usa-tax-history/trumps-tax-cut-wont-be-the-biggest-
in-u-s-history-idUSKBN1D2230
Gwartney, James. 2008. Supply side economics. Retrieved From:
https://www.econlib.org/library/Enc/SupplySideEconomics.html
Goodman, P. 2017. It started as a tax cut. Now it could change American life. Retrieved:
https://www.nytimes.com/2017/11/29/business/republican-tax-cut.html
Lee, M. (2011). The freedom agenda. Washington, D.C. Regnery Publishing.
Nouriel Roubini. 1997. Supply side economics: Do tax rate cuts increase growth and revenues
and reduce budget deficits, New York University. Retreived From:
http://people.stern.nyu.edu/nroubini/SUPPLY.HTM
Pettinger, T. 2018. The Laffer curve. Retrieved From:
https://www.economicshelp.org/blog/140859/economics/the-laffer-curve/
Rubin, I. 2017. The politics of public budgeting: getting and spending, borrowing and balancing.
Los Angeles, CA. CQ Press SAGE. 8th Ed
Schwarzwalder, R. 2018. God and the I.R.S: What the Bible can teach us about tax policy.
Retrieved From: https://www.onfaith.co/onfaith/2013/11/11/god-and-the-i-r-s-what-the-
bible-can-teach-us-about-tax-policy/300
The Holy Bible, ESV
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