Income tax reduction doesn't impact economic growth

No one likes to pay taxes, particularly more taxes. Discussions about tax rates rouse emotions as discussions about where those taxes are spent. The influence of tax rates isn’t as significant as the emotional response to them might suggest. The basic question is: Do tax rates—by adding money when cut or subtracting money when raised—result in economic growth or contraction, meaning more or fewer jobs? The structure and financing of a tax change are critical to achieving economic growth. If the tax cuts are not financed by immediate spending cuts, they will result in an increased budget deficit, which will result in inflation and increased interest rates. The net impact on growth is either small or negative or uncertain. Base-broadening measures can eliminate the effect of tax rate cuts on budget deficits. They may also reallocate resources across sectors toward their economic use, increased efficiency and raising the overall size of the economy. All tax changes will not have the same impact on growth. Reforms that improve incentives, reduce subsidies, avoid windfall gains, and avoid deficit financing will have more auspicious effects on the size of the economy, but may also create trade-offs between equity and efficiency. 

• The tax policy can influence economic choices, it is by no means obvious that tax rate cuts will ultimately lead to a larger economy in the long run. 
• The income tax rate cuts would raise the after-tax income to working, saving, and investing, they would also lessens their need to work, save, and invest. The first effect raises economic activity, while the second effect reduces it.
• Tax cuts financed by immediate cuts in unproductive government spending could raise output, but tax cuts financed by reductions in government investment could reduce output.
• If they are not financed by spending cuts, tax cuts will lead to an increase in government borrowing, which in turn, will reduce long-term growth. 
• The historical evidence and analysis suggest that tax cuts that are financed by debt for an extended period of time will actually reduce growth.
• Tax reform is complex, as it involves tax rate cuts as well as base-broadening changes. Such changes should raise the overall size of the economy in the long-term, but the magnitude of the impact are uncertain. 
• Broadening the tax base by reducing or eliminating tax expenditures raises the effective tax rate and hence will operate in a direction opposite to rate cuts and mitigate their effects on economic growth. But base-broadening has the benefit of reallocating resources to sectors that have the highest economic return, which should increase the overall size of the economy.
• A well-designed tax policies have the potential to raise economic growth, but there are many stumbling blocks along the way and certainly no guarantee that all tax changes will improve economic performance. 
• A tax change will be more growth-inducing to the extent that it involves (i) large positive incentive effects that encourage work, saving, and investment; (ii) small or negative income effects, including a careful targeting of tax cuts toward new economic activity, rather than providing windfall gains for previous activities; (iii) reductions in distortions across economic sectors and across different types of income and consumption; and (iv) minimal increases in, or reductions in, the budget deficit.
• Debt-financed tax cuts will tend to boost short-term growth, but also tend to reduce long-term growth, if they are financed eventually by higher taxes. Second, revenue-neutral income tax reform can provide a modest boost to economic growth.
• The tax rate on the average American was around 21% in 1947 and declined to around 15.5%, in 2015. The tax rates for the highest earners dropped from 86.45% in 1947 to 39.60% in 2015.  During this period US economy (GDP) grew from $243 billion in 1947 to $18,905 in 2017. Over that period, taxes increased and decreased; wages climbed and dropped; interest rates rose and fell; and so on. But GDP grew year after. It grew because something other than money drives the spirit.
• Income beyond $250,000 per annum gets tossed into savings & investment account and gets utilized for vulgar spending like gambling, trading, holidaying, ornaments, real estate, vulgar homes, money laundering etc and taxing this money doesn't make any difference to anybody.

Tax cuts that target new economic activity, reduce distortions to the allocation of capital, and are not deficit financed are more likely to lead to economic growth. Advanced countries that decrease their tax rates do not experience less economic growth as changes to the top individual income tax rate are not associated with economic growth. Studies show that the US economy has not grown in conjunction with large changes to individual income tax policy. In summary, the impact of tax cuts on growth depends on how the tax cut is financed and the assumed international capital flows. Failure of capital to flow internationally reduces the likelihood of success of tax rate cuts.

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The income tax created more criminals 

than any other single act of government ... Barry Goldwater

Almost all studies indicated that, income tax reduction has significant and negative impact on economic development. Hence income tax reforms aiming to reduce tax rates benefits only rich to become much richer and is in violation principles of democracy and equality. The present tax regime which taxes class four employees is ridiculous while almost all businessmen pays meager taxes that never exceed 10% of their real income, where as TDS deductions for salaried class starts at Rs.2.5 lakhs pa. The suggested rationalization of tax rates to be as under with stringent penalties for violations.

Since broadening tax base has evil aim of taxing the poor while doling out concessions to the rich with other hand and is unacceptable non-sense as it results in much work and little gain. Riches beyond certain point neither increases consumer spending nor capital accumulation but goes into unproductive spending & laundering that burdens the economy and abuses nature. While intelligence, talent & hard work must be rewarded, the high:low wage ratio of over 10,000 is untenable and must be brought to acceptable 200. Extreme poverty must be subsidized heavily and extreme wealth must be taxed heavily.

Economic survey 2018

• GDP is likely to touch 6.75% by the close of this FY. Far behind 8% of 2015-16. Remember GDP growth has nothing to do with well being of common man.
• Tax base goes up but tax collections are lower.
• Three year low oil price bonanza is over. The benefit was squandered away foolishly by Modi & Jaitley. Any further increase of oil price will not only slow does GDP growth but impacts inflation.
• A $20 per barrel increase in oil prices will result in GDP growth slowdown by 1%, and a rise in inflation of 1%.
• If high international oil prices persist or elevated stock prices correct sharply, provoking a ‘sudden stall’ in capital flows is likely.
• In the medium term, the three areas that would require a policy focus including employment, education, and agriculture.
• Further economic reforms like completing banks recapitalization, completing privatization of Air India.
• The Sensex has risen 46%, during past 2 years, while economic growth and corporate profits have decelerated. This trend has largely been driven by expectations of a revival in growth and a sudden change in the savings pattern of households after demonetisation. A sharp correction cannot be ruled out in case future growth of the economy and corporate earnings do not remain in line with current expectations and stock markets could trigger "stall" in capital flows and force hikes in interest rates.
• Due to climate change, annual agricultural incomes could reduce by 15-18% in irrigated areas and 20-25% in unirrigated areas. Higher investment needs to be made towards expanding irrigation with the implementation of efficient drip and sprinkler technologies. A plan to provide direct income support to farmers can be put in motion to replace inefficient agricultural subsidies. 
• Although India's unemployment rate is around 3.5%, the unemployment rate in the 15-24 age group stands at 10.5%, as per ILO estimates. India has an abysmally low capacity to provide jobs to first-time workers. The only solution for India is to strengthen its manufacturing sector. 
• Providing incentives to labour-intensive export sectors  will not only provide jobs but also implies higher current account surplus for the economy which can provide a cushion against swings in the global oil prices. Therefore, it would go a long way in reducing India's historical macro-economic vulnerability. 
• Congress leader  Randeep Surjewala said that it has turned out to be much ado without direction, cohesion and vision. Modinomics had decoupled India's robust economy by myopic vision and the double whammy of demonetisation and ill-conceived GST. With one year to go for next general elections, Prime Minister Modi has plunged India's Economy towards despondency, dejection and dire straits.
• Senior Congress leader P.Chidambaram said though the survey says growth rate for 2017-18 will be 6.75%, implying a second half growth rate of 7.5%, it offers little evidence in support of this claim. Causing 'agrarian distress' is the designed objective of the Modi government as the agriculture-GDP growth under the Modi government has plunged to just 1.9%, half of what was achieved in the first four years of the UPA. It is obvious that the government hopes that the private sector will come to the rescue of the economy. There is not much gas left in the government.
• In a jibe at the government, Mr Rahul Gandhi tweeted, "The Economic Survey 2018 says, 'Acche Din' are here, except for these minor hiccups: Industrial Growth is (down). Agricultural Growth is (down). GDP Growth is (down) and Job Growth is (down). Don't worry Be Happy!" He also tagged a video of the song "Don't worry be happy" with the tweet.

Modi is in a fiscal bind. Revenue collection remains under pressure following the chaotic roll-out of a GST, and with an eye on next year's election, his spending priorities may turn to the distressed rural sector, putting pressure on the budget deficit. Even though government committed 3.2% budget deficit for this year analysts expect this at 3.5% this year and and 3.2% next year.

Economic upturn is defined as higher GDP growth over three consecutive quarters. Not every uptick which Modi's team bombard incessantly in media and social media. All these economic data doesn't mean anything really. Go to a village and talk to them or meet some frustrated unemployed youngsters in every street corner in the evenings and you will realize state of economy. Nearly 10% of voters for 2019 elections are first time voters in age band of 18-25 educated and/or skilled joined workforce but unemployed who have no knowledge of history or politics or bothered about GDP growth or corruption. Most of them are engaged in subsistence activities and are thoroughly frustrated. They would teach lesson to Modi and BJP in 2019 general elections.

The man who could not do any thing with Rs.4-5 lakh crores of oil bonanza money in 3 years except resorting to wild gambling what can he do now with no money, non performing economy and almost all sectors in distress. Corruption is not the only high priority item in our country. The priority items are healthcare, education, unemployment, agrarian distress, and many more after which corruption control and bullet train comes. Unfortunately for our flamboyant PM style, spectacle and display alone matters and nothing else. Modi has made a hash of anything and everything. The worst PM ever in history of India. The only way to show performance is to create wrong data and that is what exactly he and his gang are doing.