According to supply side economics, a tax decrease increases the supply of funds and labor.
Macroeconomic theory known as supply-side economics holds that promoting free trade, reducing regulations, and tax rates are the best ways to promote economic growth. According to supply-side economics, customers will profit from increased availability of goods and services at cheaper costs, as well as a rise in employment. By increasing aggregate supply rather than aggregate demand, supply-side fiscal policies aim to boost output and employment while bringing down prices. The Laffer curve, a theoretical correlation between tax rates and revenue, serves as the theoretical foundation for supply-side economics. The Laffer curve predicts that when tax levels are too high, cutting tax rates will increase government income through faster economic growth, albeit it is debatable at what point rates are considered to be "too high."
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