If taxes were decreased uniformly for everyone (such that everyone was still just as wealthy relative to one another) would people live a better lifestyle?  

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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If I understand this correctly, your scenario is one in which everyone has more money than they used to, but no one would gain or lose relative to anyone else.

Economically speaking, what this would probably do would be to increase aggregate demand (AD).  (Some would argue that there will be an increase in supply, but it is not clear that this would truly happen.)  If AD rises, it could actually improve people’s lives.   If we are not at full employment right now (and surely we are not) an increase in AD would increase real Gross Domestic Product.  It might also raise prices (depending on the shape of the aggregate supply curve), but it would raise GDP.  This would mean that more goods and services would be produced and bought.  This would, presumably, raise people’s standards of living.

 

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