How could permanently lower marginal tax rates increase the capital stock, the l

Question

How could permanently lower marginal tax rates increase the capital stock, the level of education, the level of technology, and the amount of developed natural resources over time?

How does GNP compare to (is it equal to, greater than, or less than) GDP when:

Earnings of foreigners and foreign firms in the United States equal earnings of American citizens and firms overseas.

Earnings of foreigners and foreign firms in the United States exceed earnings of American citizens and firms overseas.

Earnings of foreigners and foreign firms in the United States are less than earning of American citizens and firms overseas.

Explanation / Answer

Permanently lower marginal tax rates implies the lower rate of taxation permanently. It is oftenly used by economists for higher growth and GDP. This fall in the rate of taxation would increase the after tax rate of return to each of these productive activities, which overtime increase the capital stock, the level of education, and the amount of developed natural resources.This is because lower taxation implies higher income and thus higher purchasing power and thereby increase in the level of education, technology etc.

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