A commonly discussed issue is how tax rates relate to economic growth. Supporters of tax cuts claim that a reduction in the tax rate will lead to increased economic growth and prosperity. Others claim that if we reduce taxes, almost all of the benefits will go to the rich, since the rich are the ones who pay the greatest percentage of the taxes. (Who Paid the Taxes, 1966-85?, pg 3) Tax cuts can benefit everyone and the economy if they are made in the right places and only too a certain extent. Taxes are extremely important in three key areas. An Army, to protect against foreign invaders, A police force, to protect against domestic criminals, and a court System to settle honest disputes that arise, and to punish criminals according to objectively predefined laws. (www.economics.about.com, pg 2). Its easy to see why these last two functions are super important to economic activity. .
Without a police force people would spend a lot more time trying to steel what they need and a lot less time trying to produce what they need, since stealing stuff is most often easier then having to put in the time and labor of producing it yourself. Without people producing goods economic growth would stop. The people that did produce the valuables would spend more time and money trying to protect what they've earned. In this case it is not a productive activity for the economy since it would be more beneficial for people to be using there money and resources to produce more products, and not use it to protect the products they made. There would also be more murders without a police force. Although this doesn't sound like it would have a major effect on the economy but if people are murdered there would be more productive people lost prematurely. A police force which protects the basic rights of citizens is very necessary to insure economic growth. (Effects of Taxation, pg78).
A court system also promotes economic growth.