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Discuss whether a reduction in taxation will always increase a country’s economic growth rate.

Answers should discuss role of different forms of taxation e.g., income tax, corporation tax, VAT.

Better answers will evaluate the potential limitations, and cases in which a reducation may or may not be effective. 

e.g., bringing in concepts such as Ricardian equivalence (consumers are forward-looking, so a reduction is taxation is saved to buffer against future tax increases)

e.g., substitution effects (the tax reduction makes people work less)

e.g., specific types / targeted tax (tax cuts for the poor/rich)

Andrew L. A Level Economics tutor, GCSE Economics tutor, IB Economics...

4 months ago

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