And also create infrastructures that serve as the basis for future growth (in this it is important that the money is used well, thing that in Spain has done halfway, since in the famous plan G8. 000 million for the municipalities had a bit of everything). However, Liberals argue that the multiplier effect by using this method is less, since part of the employment and the demand generated by public spending is replacing which would make private companies.
Meanwhile, tax cuts can stimulate the economy, since they may increase consumption (people have more money to spend) and investment (businesses can invest more), and can improve competitiveness compared to other countries (different taxation can favor France with respect to Spain, for example). As a counterpart to these arguments, in a situation such as the present is likely that much of the savings that citizens receive through taxes save (as demonstrated by the increase in the savings rate up to unusual 24%), with which a clear increase in consumption is not achieved. In addition, it is possible that the reduced impact of taxes on companies simply serve to fill holes or carry things a little better, but not to invest more. With regard to tax cuts, also commenting that they have greater complexity of what is recognized regularly by political parties, since there is direct, as income taxes, which are progressive, and according to which who more WINS, more pay, and not only proportionally, but one higher percentage. And there are indirect taxes, such as VAT (which is another proposal that can be heard), which pays everyone equally, regardless of their income. Would have yet a third leg with which some play are possible cuts in Social security contributions (and would that also they harm more than pensions, more casualties, which cannot be access to health care or private pension plans).
Pablo Rodriguez is a graduate in business sciences, postgraduate in auditing accounts and master MBA, passionate about the world of Economics and business management.