Tax cuts on wages and profits boost long-term economic growth.
The article examines how changes in tax rates on wages and profits affect investment, capital stock growth, and capacity utilization in the economy. Using a modified version of Kalecki's growth model, the researchers analyze the long-term impact of taxation on economic growth. The findings suggest that balanced budget changes in tax rates can influence the trend component of fixed investment, the growth rate of capital stock, and capacity utilization in the economy.