Download wealthy tax cuts - Pequannock Township High School

Do tax cuts for the
wealthy lead to
long-term economic
prosperity?
Background
Supply-Side Economics
AKA: Reganomics
 Idea that economic growth can
be most effectively created by
lowering barriers for people to
produce goods and services.
 This is done by lowering income
tax and capital gains tax rates,
and by allowing greater
flexibility by reducing
regulation.
 According to supply-side
economics, consumers will then
benefit from a greater supply of
goods and services at lower
prices.
Trickle-down Economics
 Tax breaks or other
economic benefits
provided by
government to
businesses and the
wealthy will benefit
poorer members of
society by improving
the economy as a
whole
Fast Forward
Bush Tax Cuts
 2001 & 2003 Congress passed
$1.7 trillion in tax cuts
 Legislation reduced income tax,
expanded retirement and
savings programs & repealed
estate tax
 Cuts based on projected
surpluses (+) but in 2002 gov’t
began running deficits (-)
 Blamed recession,
Iraq/Afghanistan & increases in
Medicare
Today
 Bush tax cuts were supposed to expire in 2011 but due
to fragile state of economy, Obama and Congress
reached deal to extend cuts til January 2013
 January 2013: deal signed made Bush tax cuts
permanent for individuals earning LESS THAN
$400,000 annually (couples $450,000)
 Also raised tax rates on higher earners from 35% to
39.6%- estimated to bring in $600 billion in revenue over
next 10 years
Why does this Matter?
 Experts believe inequality among Americans is slowing
down economic recovery
 Gap between rich and poor grew to widest in more than
40 years in 2011
 Among developed nations only Mexico, Turkey and
Chile have higher income inequality
 Stagnant wages and increasing debt makes in difficult
for middle-class citizens to climb economic ladder
The Debate
Pro
 Tax cuts lead to increase in
consumer spending
 Tax cuts would allow for
freedom to invest $ and take
risks necessary for economic
growth
 Cutting taxes on businesses
will give employers extra
funds to hire more workers
Con
 Tax cuts favor richest
Americans who do not need
tax reduction
 Instead of investing $ back,
high-income Americans
regard tax cut savings as
profit
 Rich become rich and little
effect on economic growth