Question

A new tax cut law was passed on December 22, 2017. From that time until September 2019, the U.S. Census Bureau reported that the U.S. Poverty Rate fell from 13.2 percent in 2008 to 11.8 percent. This was the lowest U.S. poverty rate since 2001. Also, the Median U.S. household income, which hardly moved from 2007 to 2016 (range $58,149 to $59,039), shot upward within 20 months to $63,179 as of September 2019. Everything said up to this point is true.

Conclusion: According to the Supply-Side School of Economic theory, they would say that it was the new tax cut law of 2017 that reduced business taxes from 35% to 21% that was primarily responsible for helping U.S. businesses create almost 4.7 million new jobs during this time and that it was these new jobs that largely helped to reduce the U.S. poverty rate.

true or false

Answer 1

The given sequence of events describes the effects of a tax cut.

As per the given effects, the given scenario does match with the Supply-side School of Economic theory. Hence, the statement is true.

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The main focus of supply-side theory is that government intervention should be minimum. One outcome of this is that tax rates should be as low as possible.

Due to low tax rates, consumption and investment will rise. Economic output and hence growth will also rise. Poverty levels will fall, as income levels rise.

The given facts match with this school of thought. The long term effects of these cuts will take time to reflect.