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Tax Cuts from WikiPedia:

A tax cut is a reduction in taxes. Economic stimulus via tax cuts, along with interest rate intervention and deficit spending, are one of the central tenets of Keynesian economics.

The immediate effects of a tax cut are, generally, a decrease in the real income of the government and an increase in the real income of those whose tax rate has been lowered. In the longer term, however, the effect on government income may be reversed, depending on the response that tax-payers make. Depending on the original tax rate, tax cuts may provide individuals and corporations with an incentive for investments which stimulate so much economic activity that even at the lower rate more net tax revenue will be collected.[citation needed]

The longer term macroeconomic effects of a tax cut are not predictable in general, because they depend on how the taxpayers use their additional income and how the government adjusts to its reduced income. Three idealised scenarios can be hypothesised:

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