Supply-Side Economics: It is the belief that the AS curve will determine levels of inflation, unemployment, and economic growth. To increase the economy, the AS curve should shift to the right, which will always benefit the company first. Supply-side economists focus on marginal tax rates. Marginal tax rates is the amount paid on the last dollar earned or on each additional dollar earned. By reducing the marginal tax rate, supply-siders believe that you will encourage more people to work longer and forgo leisure time for extra income. They support policies that promote GDP growth by arguing that the high marginal tax rate along with the current system of transferred payments. They provide disincentives to work, invest, innovate, and undertake entrepreneurial ventures. It is also known as Reaganomics because Reagan lowered the marginal tax rate to get the U.S. out of a recession, which led to a deficit.
Laffer Curve: It is a tradeoff between tax rates and government revenue. It is used to support the supply-side argument.
3 Criticisms:
1) Research suggests that the impact of tax rates on incentives to work save and invest are small.
2) Tax cuts increase demand, which can fuel inflation and causes demand to exceed supply.
3) Where the economy is actually located on the curve is difficult to determine.
The post was informative and explain the topic well. I would've liked it better if it was more spread out.
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