Supply Side Economics Does this really work?

The purpose of Income Taxes

The Laffer Curve Illustrates the amount of revenue Government collects is a function of tax rate When tax rates are very high: an tax rate => tax revenues

Supply-Side Economics Orthodox macro theory consists of demand-oriented theories they failed to explain stagflation (late 1970s) Supply-side economists believe the problems were high rates of taxation & heavy regulation: This had reduced the incentive to work, save and invest. What was needed was not a demand stimulus Incentives are needed to stimulate supply. What is De-regulation?

Supply-Side Policy Goal of a supply-side policy is to shift the aggregate supply curve to the right The supply-side toolbox has several tools: Tax cuts to stimulate work effort, saving, and investment Deregulation to reduce production cost/stimulate investment. Expenditures on education training/research expands capacity to produce Immigration policies alter the size/skill of labor force

Graphing Supply Side Economics

Evaluating Supply-Side Economics Among the criticisms of supply-side economics is that it is unlikely a tax cut would substantially increase the supply of labor. When households receive a higher after-tax wage, they might have an incentive to work more, but they may also choose to work less.

Supply-Side Policy Milestones

End For more information see the Supply Side reading on my website

Supply-Side Policy Milestones

Supply-Side Policy Milestones

Supply-Side Policy Milestones