Should Taxes be raised during a recession?
Generally, when taxes are cut, consumption increases and this stimulates the economy. However, in a recession, where we have depressed consumption, does this still hold?
We raise taxes in order to fund government spending, which in the absence of consumer demand, is the one stiumulating consumption and trying to revive the economy.
We have seen that tax rebates don't always work..
It depends on who is getting taxed. A temporary tax cut for the poor will stimulate spending, while in case for the rich, it will stimulate saving..
In the end, somehow government must cover the deficit it incurred..
Tough question to answer and history might be the one to tell what the solution(s) is/are.
