By Paul Sperry. The historical tables in the back of the latest “Economic Report of the President” show that the Bush tax cuts generated more, not less, federal revenues — a phenomenon that also held true for Presidents Clinton, Reagan and Kennedy.
All four leaders, two Republicans and two Democrats, slashed taxes for top individual earners or investors. And once these rate reductions took effect and began stimulating economic activity, record individual income-tax receipts poured into the U.S. Treasury. (See the charts above.) Revenues increased even after adjusting for inflation and population growth.
Kennedy’s major tax cut, which included chopping the top marginal rate to 70% from 91%, became law in early 1964, after his untimely death. It promised to grow the economy and close the budget gap.
“Coming at a time of substantial deficit in the federal budget, this was a startling proposal to many observers,” said New York University economist Richard Sylla, co-author of “The Evolution of the American Economy.”
To the shock of many naysaying Democrats, the plan worked. The economy grew at an average 5.5% clip, and unemployment fell to 3.8%. In turn, the annual deficit shrank to $1 billion from $7 billion as individual income-tax receipts nearly doubled. (See the chart.) Read more from this story HERE.
Obama Spending, Not Bush Tax Cuts, Drives Deficit
By John Merline. President Obama often talks about the need for a “balanced” approach to deficit reduction, by which he means tax hikes in addition to spending cuts.
At the recent presidential debate, for example, he said, “We’ve got to reduce our deficit, but we’ve got to do it in a balanced way — asking the wealthy to pay a little bit more along with cuts.”
The only problem with this approach is that the massive projected deficits over the next 10 years aren’t the result of too few taxes. They are entirely the result of too much spending.
Here’s the proof: According to the latest budget forecast from the Congressional Budget Office, even if every expiring tax cut were kept in place permanently — including all the Bush tax cuts and various other expiring cuts from last year and this year — and even if the alternative minimum tax were permanently indexed to inflation, federal revenues would still rise to 18.6% of GDP by 2022.
To put that figure in perspective, from 1948 and 2008, federal revenues averaged 18% of GDP. Read more from this story HERE.