According to supply-side economics, consumers will then benefit from a greater supply of goods and services at lower prices and employment will increase. However, what most separates supply-side side by side book 1 pdf free download as a modern phenomenon is its argument in favor of low tax rates primarily for collective and notably working-class reasons, rather than traditional ideological ones.
Their claim was that each man had a right to himself and his property and therefore taxation was immoral and of questionable legal grounding. A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value”. He turned Say’s law on its head in the 1930s by declaring that demand creates its own supply. Nixon and Carter in the 1970s. Supply-siders argued that in a high tax rate environment, lowering tax rates would result in either increased revenues or smaller revenue losses than one would expect relying on only static estimates of the previous tax base.
This led supply-siders to advocate large reductions in marginal income and capital gains tax rates to encourage greater investment, which would produce more supply. Jude Wanniski and many others advocate a zero capital gains rate. The increased aggregate supply would result in increased aggregate demand, hence the term “supply-side economics”. Supply-side economics holds that increased taxation steadily reduces economic activity within a nation and discourages investment. As such, higher taxation leads to lower levels of specialization and lower economic efficiency. The idea is said to be illustrated by the Laffer curve. Many early proponents argued that the size of the economic growth would be significant enough that the increased government revenue from a faster-growing economy would be sufficient to compensate completely for the short-term costs of a tax cut and that tax cuts could in fact cause overall revenue to increase.