[–] nullifyNWO 0 points 1 points (+1|-0) ago  (edited ago)

Gross Domestic Product is: The sum of all products and services sold, measured in Dollars.

This sum in Dollars will increase with the money supply and with the velocity of the cash flow.

When the garbage service increases in price, the GDP increases accordingly. This is why the nations of the communist Sovjet Union had growth in GDP, but the economy did less and less serve the people - it was just BS served and sold by the state.

When taxes are lowered, the share of the state in the GDP decreases. Therefore, tax cuts may or may not lead to an increase in GDP. They do, because peoples opportunities and expectations grow, they will act better, offer better stuff and the cash flow will accellerate accordingly, mirroring REAL economic value.

When you cut taxes rapidly, an economy, freed from the burden af taxes (and regulations!) explodes. No other high-tax-system will be able to compete. Also, the growth of GDP will reflect REAL economic wealth, because on the free market only the better stuff is bought (whereas, the increase in fees for garbage service .... we had that.)

Edit: gabage service is assumed to be served by the state in this example.