effect of tax rate cuts on budget deficits, but at the same time, they reduce the impact on labor supply, saving, and investment and thus reduce the direct impact on growth.
Increase in taxes will result in a decrease in savings and investment
Explanation:
A government normally increases taxes to boost it's tax revenue but this also results in the decrease of savings and investments. Higher taxes leaves consumers with less disposable income which then discourages them from saving and investing.
