Recently, Pappu Yadav, founder of JAP and a crusader of people’s voice made a promise to people during his election trail at Bhabua in Kaimur district of Bihar. He thoughtfully said that he would write off taxes of the businessmen if he comes to power in Bihar, which he needs to badly. He made this announcement to enhance industries in the state. It was really an eye-catching statement made to capture the support of the whole business community. Was he talking about supply-side economics?
The American presidential elections also appear to be discussing the same economic theory of lower taxation and fewer regulations. If you were to ask a majority of people, under which political party, Democrat or Republican, the stock market performed better, most of them would possibly confess it is Republicans. After all, Republican’s policies often focus on lower corporate taxes and fewer regulations.
It is, of course, a macro-economics theory that argues over economic growth, which can be most effectively created by lowering taxes and decreasing regulation, by which it is directly opposed to demand-side economics, another principle.
According to supply-side economics, consumers will benefit from a greater supply of goods and services at lower prices, and employment will increase, which is badly required in the state of Bihar.
The Laffer Curve theory, developed by supply-side economist Arthur Laffer, shows the relationship between tax rates and the amount of tax revenue collected by governments. The curve is used to illustrate Laffer’s argument that sometimes cutting tax rates can increase total tax revenue because of higher economic growth. It is one of the main theoretical constructs of supply-side economics.
The term “supply-side economics” was thought for some time to have been coined by a journalist Jude Wanniski in the year 1975, but according to Robert D. Atkinson, the term “supply-side” was first used in 1976 by Herbert Stein (a former economic adviser to American President Richard Nixon) and only later that year was this term repeated by Jude Wanniski. Its very use straight connotes the ideas of economists Robert Mundell and Arthur Laffer.