Congress recently passed, and the President signed, a tax bill that substantially lowers the marginal income tax rate on high-income individuals and on corporations, and that essentially eliminates the estate tax for estates under $25 million. Given US economic history in the 20th and 21st centuries, what is the economic argument for reducing the progressivity of the tax system?

A		There is no good argument in a consumption-driven economy, unless these measures have a stimulative impact on aggregate demand and also produce wage growth. As shown by the evidence from the consensus Keynesian economic policies of the 1930s through the 1960s, and again in the 1990s, progressive taxation works to support public goods just as Adam Smith predicted, and public goods stimulate economic growth.
B		The economic argument is that high-income individuals will spend their dividends, capital gains, rents, carried interest, and corporate profits on a wave of new consumption and hiring.
C		The economic argument is also that international corporations will repatriate their overseas profits, and that without this very significant tax relief, those profits would continue to accumulate offshore, thus starving American industry of capital.
D		All of the above.

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The correct answer is Option B The economic argument is that highincome indivi... View the full answer