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Friedman Tax Cuts vs. Buchanan Deficit Reduction as the Best Way of Constraining Government

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  • Lee, Dwight R
  • Vedder, Richard K

Abstract

Does a tax cut reduce government spending by reducing government revenue or does it increase government spending by lowering the perceived price of government services? Some economists, including Milton Friedman, take the former position, while others, including James Buchanan, think the latter is true. The question seems to resist an empirical answer, with some studies supporting Friedman's view and others supporting Buchanan's. In this paper, each position is shown to be a special case in a simple model of taxation and deficit determination. Copyright 1992 by Oxford University Press.

Suggested Citation

  • Lee, Dwight R & Vedder, Richard K, 1992. "Friedman Tax Cuts vs. Buchanan Deficit Reduction as the Best Way of Constraining Government," Economic Inquiry, Western Economic Association International, vol. 30(4), pages 722-732, October.
    • Handle: RePEc:oup:ecinqu:v:30:y:1992:i:4:p:722-32
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    Cited by:

    1. Westerlund, Joakim & Mahdavi, Saeid & Firoozi, Fathali, 2011. "The tax-spending nexus: Evidence from a panel of US state-local governments," Economic Modelling, Elsevier, vol. 28(3), pages 885-890, May.
    2. Ali F. Darrat, 1998. "Tax and Spend, or Spend and Tax? An Inquiry into the Turkish Budgetary Process," Southern Economic Journal, John Wiley & Sons, vol. 64(4), pages 940-956, April.
    3. James E. Payne, 2003. "A Survey of the International Empirical Evidence on the Tax-Spend Debate," Public Finance Review, , vol. 31(3), pages 302-324, May.
    4. Víctor I Espinosa & David O Cueva, 2024. "The political economy of fiscal dominance: Evidence from the Chilean government of Salvador Allende," Economic Affairs, Wiley Blackwell, vol. 44(1), pages 118-138, February.
    5. Benjamin Cheng, 1999. "Causality between taxes and expenditures: Evidence from Latin American countries," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(2), pages 184-192, June.
    6. Randall G. Holcombe & Jeffrey A. Mills, 1995. "Politics and Deficit Finance," Public Finance Review, , vol. 23(4), pages 448-466, October.

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