WHY WHEN WE ARE ON THE DOWNWARD SLOPING SIDE OF THE LAFFER CURVE WOULD A TAX CUT  GIVE PEOPLE AN INCENTIVE TO WORK MORE AND JOIN THE LABOR FORCE? I MEAN WHY JUST BECAUSE TAXES ARE LOWERED FROM SUCH A HIGH RATE WOULD THAT ENCOURAGE PEOPLE TO WORK MORE AND JOIN THE LABOR FORCE? I WOULDN'T REALLY SEE A CHANGE IN BEHAVIOR!

Expert Answers

An illustration of the letter 'A' in a speech bubbles

The idea here is that when taxes are lower, you take home more of your pay because you have to give less of it to the government.  In effect, that is an increase in your wages.  If wages increase, then (the argument goes) you will want to work more because...

Unlock
This Answer Now

Start your 48-hour free trial to unlock this answer and thousands more. Enjoy eNotes ad-free and cancel anytime.

Start your 48-Hour Free Trial

The idea here is that when taxes are lower, you take home more of your pay because you have to give less of it to the government.  In effect, that is an increase in your wages.  If wages increase, then (the argument goes) you will want to work more because for each hour you work you are getting more money.  Since it's more worth your while to work, you will work more.

Of course, you can argue that people will just work less for the same amount of pay.  But supply-side economists do not believe that this is how it will happen.  They believe you'll work more to get more money.

Approved by eNotes Editorial Team