The discussion about taxes and the deficit ,assumes that all government expenditures serve a necessity whose priority nodoby would dare to challenge. But what about wasted resources because of ill designed Government policies?. For instance after 2010 , most of the the Euro zone countries run increasing deficit in some cases well beyond the 3% range accepted by EU institutionality. It was not only because the private sector was still trapped in the follow up of the 2008 crisis.If that was the case the fiscal expansion would has been a compensatory one. Instead , it went well beyond that compensation because the Euro currency gave support to moral hazard behaviour on the side of Government expenditure to pursue on its own. The problem arose when those deficit had to be cut down, there was no way other than to cut governmenet expenditures .Latin america economies experience is full of over government expenditures. Thus, it seems more plausible that Government expenditures rather than taxes, matter more when it comes to keep the deficit under control.-
So, tax cut does not mean higher deficit if expenditures are in line with the resources the economy is capable of producing. Under optimal condition it should be feasible that the efficient Government expenditures would be lower than the resources the ecomomy generates through taxes. How come?: Government should be focus where its social welfare impact is higher, which means it should be focused on few activites with such a profile(health ,education).Other expenditures, aside from those necessary for both internal ,
and external defense such as infraestructure, can be carried out by the private sector. There is not need to have high taxes , unless that the value of the services governmemt can provides means higher impact on social welfare.This has limitations, as long as private sector, create wealth while government does not.-
By the same reason, taxes are negative for economic growth .W McBride, of The Tax Foundation made in 2012 a survey of 26 research about the impact of taxes on economic growth.In 23 of those articles, found that the impact was negative. Evidence on the contrary, may also be possible as long as the economy is less flexible and has lower resource mobility or high regulations standard, such that resources ara stick to a pattern with few alternatives. In such a case taxes , may be neutral or do not affect economic growth.The main conclusion would be that those economies which has a more dynamic performance, are probably the ones which get the worst impact of taxes.-
