ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Tax cuts reduce government revenues and create either a budget deficit or increased sovereign debt. Critics often argue that the tax cut benefits the rich at the expense of those with fewer resources as services beneficial to those in a lower income bracket are cut.

Detailed explanation-2: -They also largely indicate that tax increases can generate increased revenue for government but often at the expense of economic growth and mobility for taxpayers. Conversely, tax cuts tend to produce short-lived revenue decreases while promoting long-term economic growth.

Detailed explanation-3: -There are many causes behind tax evasion. Some of the causes of tax evasion are the existence of tax havens, higher tax rates, lack of integrity on the part of the citizens, presence of informal economy, lack of simplicity in the tax legislations, inefficiency of tax administration etc.

Detailed explanation-4: -An increase in taxes or a decrease in spending during an economic expansion can work to eliminate the budget deficit and pay off some of the government debt. 2. The government might want to reduce aggregate demand if it believes that the economy is expanding beyond its long-run capabilities.