
All right, let's say before that there's one person in an economy that earns $100 a year, to make the calculations easier Now, let's also assume GDP is $100,000 per year. Also, the tax rate on the person above is 30%, so current revenue gained from income taxes is $30. Let's say someone comes along and states that we should change this person's tax rate to 15% because it will cause unprecedented growth, and they will pay for themselves. Well, there is a well established trend in tax recipts, that around 20% of GDP goes to the government in taxes. Therefore, how much would this person need to improve the economy to make the tax cut pay for themselves.
Well, that's a simple algebra problem. (.20)X=15 X=75. or in other words, GDP will need to improve to 100,075 to make the tax cut pay for itself, but this is somewhat ridiculous as the person would need to make his 15 dollars into 75 dollars of economic activity. To put this in perspective, even the most effective economic boosters only grant about $1.60 for every dollar spent. The problem with tax cuts for the rich is that they're not economically effective enough to be used.
I hope that clears it up.
