In the context of supply-side economics, what is the expected outcome of reducing tax rates?

Reducing tax rates is a fundamental principle of supply-side economics, which posits that lowering taxes can stimulate economic growth. When tax rates are reduced, individuals and businesses have more disposable income. This increased disposable income can lead to greater consumer spending and investment by businesses.

As businesses have more capital available from lower taxes, they are encouraged to invest in expansion, technology, and hiring, which can lead to increased productivity. The rationale is that when businesses invest more, they contribute to economic growth, ultimately leading to job creation and higher wages for workers.

Moreover, the idea is that the benefits of this growth can create a more robust economy that might offset the reduction in tax rates. Thus, the expectation is that the overall economy will benefit through enhanced economic activity rather than merely focusing on the immediate decrease in government revenue.