Lowering income taxes has many benefits. The benefits allow the government to make more money off corporate tax and causes the unemployment rate to drop. Different societies tax differently and we can learn from their experiences. 

A recent study by Daniel J. Mitchel argues that:

“Nations, including Scandinavian countries, are reducing tax rates on individual capital income and lowering taxes on wealth. All these reforms boost economic performance by lowering the marginal tax rate on productive behavior. It is no surprise that nations that enact these policies grow faster and create more jobs.”

Looking at different societies paying “tax” differently, there always is an end result which matters the most. When income tax was lowered, more jobs were created, and when income tax was raised many people were hurt financially. With more jobs being created from lower income taxes, businesses will be able to get more employees, which will create more taxable profits. When there are more available jobs unemployment drops and more people pay income tax. More money being made by the businesses will allow the government to make more off corporate tax. Lowering income taxes doesn’t only generate more corporate tax and more employment, it makes more capital gains taxes. 

 Lowering income taxes also has more benefits. It allows people to invest and help the government make more money off capital gains tax. Different societies' current tax systems punish success and give less money for the rich to spare.

A recent study by Daniel J. Mitchel argues that:

“Governments that try to keep tax rates high, by contrast, suffer from stagnation and joblessness. Politicians from these countries whine about ''harmful'' tax competition from Ireland, Slovakia, Estonia, and the United States, but they should look in the mirror if they want to find who really deserves to be blamed. Instead of fighting to preserve existing tax systems that punish job creation and success.”

If the current tax system is punishing success, people do not have access to the money they generated; however, if income tax goes down, more money will become disposable and can be invested. Investments when successful generate capital gains and more economic activity, and become another opportunity for additional taxes. Lowering income taxes doesn’t only make more off capital gains; however, makes more off sales tax. 

    Lowering taxes brings one last strong benefit, which is the additional revenues from sales tax. Currently, high income families in the US pay around 37% of their income as tax, which means a large portion of their income is no longer available to them. 

A recent study by Tina Orem states that:

“There are seven federal tax brackets for the 2021 tax year: 10%, 12%, 22%, 24%, 32%, 35% and 37%. Your bracket depends on your taxable income and filing status. These are the rates for taxes due in April 2022.”

If income tax goes down, more money will become disposable. With more disposable income people will spend more, generating more sales tax. Sales tax makes money off products sold by companies or stores, so people buying more means more sales tax.

    The challenge with lowering income taxes is that it does not always balance out the new revenue from the other types of taxes. However, it is clear that reduction will cause increases in the other tax types.  However, there is evidence, such as Scandinavia, that lowering income tax does indeed keep the government running with enough money.

    If you think lowering income tax is a bad idea, as the Capital One commercial says “look in your wallet.”