Lawyering in the Age of Artificial Intelligence

Dec 12, 2023 ·

This paper examines the effects of changes in tax policy on economic growth. The authors focus on the lag between changes in tax rates and the resulting impact on economic growth. The study reveals that when taxes are cut, it may take several years for economic growth to start to accelerate. This lag is a result of the disruption in the market caused by the initial change in the tax rate.

In order to analyze this phenomenon, the authors survey data from 10 developed countries over a period of 30 years. They compare the effects of reducing taxes and increasing taxes on economic growth. They find that in all cases, cutting taxes led to a positive effect on economic growth, but the lag was quite long. In some cases, the effect of a tax reduction on economic growth could take up to 5 years.

The authors also consider the effects of tax cuts on different types of businesses. They find that small and medium-sized businesses benefit more from tax cuts than larger ones. This can be attributed to the fact that large companies are better able to absorb the shock of a tax cut while smaller firms have fewer resources to do so.

The paper concludes that changes in tax policy can have a significant impact on economic growth. However, the effects of these changes may take time to manifest themselves. Furthermore, cutting taxes tends to benefit small and medium-sized businesses more than larger ones. These findings suggest that governments should consider the long-term implications of their tax policies before implementing them.