Would lowering taxes boost the economy?

The U.S. government is currently pulling out all the stops in order to give the economy a much-needed boost in the midst of the recession – yet some experts say there are few signs the measures are working.

Writing on Forbes.com, two economists propose a step that they suggest could be less costly than a stimulus plan – eliminating corporate taxes and reducing tax rates on individuals.

Brian S. Wesbury and Robert Stein of First Trust Advisors suggest that injecting money directly into financial institutions may not necessarily free up credit or change investor perceptions.

Instead, they explain that getting rid of corporate taxes would cost around half of the stimulus plan proposed by President-elect Barack Obama and would encourage investment.

Additionally, they propose that slashing the income tax on individuals by 50 percent as a way to put more money in people’s pockets, which could boost spending – or allowing all capital losses by individuals to be written off on this year’s taxes.

"This would limit the selling of profitable investments this year to absorb those losses for tax purposes only," the authors write.

Speaker of the House Nancy Pelosi recently said that the Democrats are preparing a stimulus package that could be finalized early next year.