I wonder what kool aide the GOP is drinking. Cut taxes to increase revenue. Over and over again. When we cut taxes to zero, will revenue explode to infinity? Are they running a Ponzi Scheme of stupid?
For the intellectually challenged (Tea party, this means you!), revenue from individual income taxes usually rises every year as inflation raises prices and wages, and as new entrants expand the job market (and the tax base) by a million workers a year.
We’ve had this experiment. Two tax cutters and one tax raiser. Let's look at the facts.
Just for an anchoring point, remember that wage inflation of 3% increases revenues by 27% over an eight-year period and that the workforce will usually grow by 1.5%.
Reagan was famous for his tax cuts, although his first cuts from 1981 to 1986 had a top rate of 50%. In 1987, he dropped the top rate to 38.5%, and then 28% in his last year. Income tax revenues (not total revenue or corporate revenue) was $282b in 1981 and $433 in 1989 (the last year of a Reagan budget), so revenues increased by 53%!! The rate of increase is 5.51% per year.
George Bush had a similar record in his eight years. He started with a cut to 39.1% in 2001, 38.6 in 2001, and 35% in 2003. Revenues in 2001 were 888b and 1,377b in 2009, an increase of 55.06%, which corresponds to 5.64% per year.
Now look at the tax raiser. Clinton raised the top rate to 39.6% and kept it there. Revenues increased from 503b in 1993 to 981b in 2001, an increase of 95% and a rate of 8.7% per year.
So Clinton increased revenue 54% faster than either Bush or Reagan by raising the tax rate to slightly higher than Reagan had for most of his term.
Revenue will almost always increase from year to year. Tax cuts have been shown to increase revenue at a significantly lower rate than somewhat higher taxes.
Oh – let's talk about the rest of the picture - spending and debt.
Federal spending rose at a rate of 6.7% under Reagan, 8.21% under Bush, and 3.53% under Clinton. Reagan increased the national debt at a rate of 14.03%, Bust increased it 8.52% a year – and Clinton increased it 3.43% a year.
OK, GOP economists, the floor is yours.