Can lower taxes on dividends and capital gains help hasten an economic recovery?
The answer to this question can go different ways depending on the type of economist you are. Some economists believe lowering taxes on dividends and capital gains would help increase the rate of investments occurring throughout the world, thus causing aggregate demand and short run aggregate supply to both increase, allowing for the economy to go into a recovery when in a recession, or in an overheat if the economy is already stable. Other economists believe strictly in the auto-adjustment of the economy without any monetary or fiscal policy intervention. The adjustment happens naturally through many different factors in the economy like wages to workers, goods and service prices, etc. and allows the economy to get back to stable without the help of policy changes. These economists believe lowering taxes would cause the economy to send itself into another problem, causing more harm than good. So all in all, this question really depends on the person you ask. Ideally, lowering taxes to invoke a boom in capitalistic behavior would allow for an economy to recover from a recession, but could actually make matters worse.