Tax Cuts Lead to Economic Growth

The US Treasury Department released an analysis yesterday finding what we already knew - tax cuts spur economic growth. The Wall Street Journal summarizes this report.

It also finds that some tax cuts (dividends and capital gains) do more to spur economic growth than others (e.g. child tax credits).

Perhaps more useful is the finding that economic growth is only sustained when tax cuts are financed by reducing government spending. If spending is not reduced and taxes are increased in the future (i.e. "repealing the Bush tax cuts" as many Democrats argue), then GDP will decline.

Download the full study here.