Question

President Obama campaigned on the idea that he would reduce taxes on 95% of working Americans. Why would this be difficult to put into practice? While reducing taxes on the 95% of working Americans may be in the best interest of the people who pay lower taxes, is it in the best interest of the macro economy?

Answer 1

It would be difficult to put into practice because the reduction of the 95% tax as proposed by Barack Obama could help promote growth and, if it is well on track, it could also improve the distribution of income. However, growth can not be fully appreciated to compensate for the loss of tax revenues that were definitively generated by the reduction in the acquisition itself. People with greater purchasing power invest in a greater proportion of their consumption expenditure to services. Therefore, when less taxes are paid, so will demand and wages.