Principles of Macroeconomics

¶ … tax policies proposed by the republican presidential candidate. Mitt Romney has proposed that the marginal tax rate should be reduced by twenty five percent across the board for all tax payers. However, the research conducted indicates that this policy will most likely not meet the state objectives of the policy which is to stimulate the economy.

The main concept in this article is how taxes can be used to serve as a stimulus to the economy. The argument by the conservative leaders is that tax cuts that are primarily directed towards the top income earners in the United States will provide an incentive for the "job creators" to create more jobs. However, the researched look at different periods in history and found no correlation between reductions in taxes for the top earners and unemployment. Therefore, there is no historical evidence to support this position. However, evidence was found that by lowering taxes on the lower and middle class tax brackets that this could work to stimulate demand. For example, if lower and middle income Americans' have more money to pay the things they want because they are paying less in taxes then this will increase demand.