Do lower taxes on dividends and capital gains help hasten an economic recovery or growth in the US production?

Question

Tax rates on both dividends and capital gains have been cut down to historical lows. Maximum tax rate on both dividends and capital gains is now set at 15%. Policy makers agreed to such a reduction hoping to see faster economic recovery, and further job growth.

Answer 1

This approach is based on an economic theory called "supply side economics."  It was advanced by the Reagan administration in the 1980s.

In theory, lowering taxes on dividends and capital gains will encourage investors to make the type of investments that will create more jobs.

In practice, this theory has been largely debunked.  As a result, the direct and indirect tax burden for the middle class has increased.  Wages have stagnated while expenses have skyrocketed.  The poor and middle class have to pay a larger percentage of their incomes for essentials.  The wealthy investor class needs a much smaller portion of their incomes for essentials.

"Indirect taxes" are the result of shrinking tax revenue.  When capital gains taxes are cut, the wealthy investor class gets a tax cut, but the federal government has less money to spend on the things we all take for granted.  What often gets cut is spending on roads, highways, and bridges, federal aid for college students, federal education spending, and spending for Medicaid, etc.  So, these costs get passed on down to the state and local level, and the tax burden increases on the middle class.  Their property taxes have to be raised and meanwhile, they have to spend more money for college tuition, health care, and other essentials because the federal  government is paying less for these things.