Tax Cuts: Impact on the Phillips Curve in the United States

A tax cut on a limited amount of people (in this case, presumably individuals at higher income levels) can offer more disposable income leading these individuals to possibly spend more. This would likely increase demand in the short run, possibly leading to a temporary rise in inflation and decrease in unemployment, represented as a movement along the short-run Phillips Curve down and right. However, this wouldn’t normally cause a shift in the Short Run or Long Run Phillips Curve because both of them rely on aggregate demand and supply in the economy and a tax cut for a limited number of people is unlikely to significantly impact these on a larger scale. Therefore, the best option would be: Movement along the Short Run Phillips Curve down and right.