Tax cuts are rarely, if ever, paid for by corresponding spending cuts. That means they are no different from increased deficit spending in terms of the inflationary impacts on the economy. In either case there is more money in circulation as a result. To take the most straightforward example, the stimulus money that came out under Trump was in the form of a tax credit or "tax expenditure". It reduced the tax burden on individuals through deficit spending from the government. If you route a tax cut through a corporation, a wealthy individual, or a poor individual (policy choices) more money winds up back in the economy in any case. The same thing happens if the government spends more money on defense contracts (money routed through a corporation and ultimately wealthy employees), welfare, or any other spending choice.

I realize you would argue for corresponding spending cuts at the same time, but I can't remember the last time that actually happened in Washington. If you did wind up cutting taxes and spending in equal amounts, the total amount of money in the economy is held at zero. At first blush, that wouldn't have a significant impact on inflation one way or the other. Consumers and companies would have more money to spend, but government contracts to the companies would go down by the same amount so you'd probably see job losses that offset the benefit to the companies. The excess amount of money on the consumer side relative to supply is a main cause of inflation right now, so I don't see how adding more on that side helps reduce inflation at all.

Cutting taxes would reduce costs on the production side. That means they could make more widgets at the same cost in Econ 101 terms. But given that international supply chain issues are causing scarcity in a ton of markets, the cost to produce the widgets isn't the problem. And if costs go down demand will go up, which further exacerbates the supply chain issues. A reduction in the gas tax would probably have a positive feedback effect for both consumers and manufacturers, which has been discussed in Washington. But given the shortage in oil, if you reduce the gas tax you're going to increase demand. It's all one big interconnected feedback loop. That's why I don't like government intervention in the economy at all and don't blame or credit Presidents for economic conditions unless they go in and really muck things up.

Cutting spending by more than you cut taxes is actually deflationary, but it risks causing a recession. That's the same game that the Fed is playing with interest rates at the moment.

At this point, I can't even point to a single US COVID regulation that impacts the economy, so I'm not sure what there is to cut.

[Post edited by CMUHoo at 05/19/2022 2:26PM]