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The Major Arguments for and against Cutting Taxes to Promote Economic Development - Essay Example
A review of the available data strongly suggests that the answer to both of these questions is no. In this paper, it is going to the major arguments for and against tax cuts and incentives as far as the promotion of economic development is concerned.
According to theory, tax cuts stimulate the economy of a country. Hence, in theory, arguments in favor of tax exemptions are available. Particularly in the framework of neo-liberal economic policies, strong theoretical arguments defend tax cuts in an organized way. However, Lynch has chosen to set up counter-arguments in this context by evaluating each favoring theoretical argument critically and analytically. Lynch states, “The pressure to cut state and local spending is likely to persist as long as these jurisdictions continue to face budget deficits, demands for additional tax cuts, and calls for a smaller role for government.” Hence, tax cuts directly confront government’s expenditure for the social sector. In theory, following arguments are furnished in favour of cutting taxes: Tax Burden Argument: Higher rates of business taxes increase the cost of doing business. Hence, exempting business houses from taxes “encourage existing firms to invest, expand, or remain in a state; stimulate new firm start-up; and convince out-of-state firms to relocate to the incentive-offering state”. ...