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assume congress wants to stimulate a sluggish economy in which the basic economic indicators are all trending downward. How could it used its taxing power to do this?

User Jmetz
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Answer:

Depends on which party you ask.

Step-by-step explanation:

There are two different answers to this question.

If you were to ask a Democrat they would probably answer that Congress could use its taxation power to raise taxes, especially on large companies and wealthy individuals. This would raise government revenue, and would give Congress more spending power. They would then argue that they could revitalise the US economy by using that money to directly employ federal workers to build social infrastructure (Hospitals, roads etc). This would have a multiplying effect on the economy as more people would be in work and thus would pay more tax and spend more which would revitalise the economy. This is similar to what President Roosevelt did in the aftermath of the Great Depression, through his New Deal.

A Republican however would argue that the congress should use their taxation powers to reduce taxes. In particular they would look to reduce tax on corporations and wealthy individuals. In theory this would give them more money to spend and they would pass these savings onto the consumers. This in turn would give consumers more money to spend and would then create the multiplying effect that helps revitalise the economy. The companies could also use the money to expand, thus creating more jobs, or to pay their current staff more money. This is the theory behind Reagan's trickle down economics, and Donald Trumps 2017 Tax cuts, which resulted in Walmart paying their staff a 'living wage'.

User Mike Vella
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