-You own a company and the tax rate goes up on taxable income over $250K.
-Your projected taxable income in 2012 is $300K.
-IF you had sufficient demand that you would really like to expand your capacity by hiring additional personnel and/or getting new equipment, etc. (all deductible expenses, subject to certain amortization rules on equipment), you could bring your taxable income under the $250K threshold, avoiding the higher rate on that income. I believe this is the stimulative effect (or effective subsidy) SK and Brian are referring to, as the tax saved on that $50K is essentially a subsidy for growing one’s business.
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edit: It’s like when we hear peole claim that they will stop working so many hours, etc. in order to bring their taxable income under the $250K threshold; but instead of shrinking their business/gross income, they grow it.
