Thursday, June 3, 2010

How Tax Cuts Work

Why does cutting taxes result in MORE tax money being collected? The short answer is that by reducing tax rates (the percent of tax collected on each dollar of income) the government encourages people to work and earn more. Just as a business will often opt to reduce the price of its goods in order to increase the amount sold, the government is basically reducing the cost of working and thereby encouraging people to work and earn more.

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