Final answer:
Critics argue that empirical evidence shows that tax cuts have an impact of uncertain direction, are only temporary, and have effects that are slow to emerge. The effects are generally small and the belief that tax cuts can pay for themselves is not widely supported. Additionally, the impact of tax cuts depends on perceptions of their permanence.
Step-by-step explanation:
The concept behind the Laffer Curve is that at a certain point, increasing tax rates can lead to a decrease in tax revenues, as individuals may be disincentivized to earn more or find ways to avoid taxes. Critics argue the effects of tax cuts on hours worked and general economic behavior are typically minor and the assumption that tax cuts will pay for themselves by spurring enough economic growth to offset the loss in revenue is not supported by empirical evidence. In many cases, the economy is not on the 'wrong side' of the Laffer Curve where such effects would be most likely. Additionally, the perception that tax cuts will pay for themselves can depend on whether they are accompanied by corresponding government spending cuts.
Moreover, the impact of a tax cut is influenced by whether the policy is seen as temporary or permanent. Temporary tax cuts are expected to have a much weaker effect on aggregate demand than permanent ones because individuals and businesses anticipate the reversion to previous levels and adjust their behavior accordingly. This distinction between temporary and permanent changes significantly affects how economic agents respond to fiscal policy.