The Republican mantra of Tax Cuts Increase Revenue is simply not true. I will show that revenue is adversely affected by tax cuts, and they do in fact lower revenues. The proof is out there for anyone with the Google and the ability to tell small numbers from large ones. I use revenue numbers supplied by the Tax Policy Center at the Brookings Institute.
One must keep in mind that revenues will rise virtually every year because of inflation, expansion of the job market, and increased productivity. During the period from 1976 to 2007, revenue increased at an average of 7.3%. The highest growth in revenue occurred in 1977, when revenues increased 19.3%. Other years with increases of over 10% are 1977-1981, 1984, 1985, 1987, and 2000.
Years with negative revenue growth are 1983, 2001, 2002, and 2003, with 2002 taking in just 93.1% of the revenue received in 2001. These years coincide with the Reagan and Bush tax cuts and show that, in the short run, tax cuts reduce revenue.
The first major tax experiment was by Reagan in 1981. The first year of the tax cuts, 1982, revenues went up 3%, and the second year they went down 2.8%. Then Reagan passed some taxes, and increased revenues considerably during the second term, with revenues rising over 10% for three years.
The case against the Bush Tax Cuts is clearer because little changes have been made to the tax code over a long period of time. In 2001, revenues went down 1.7%, in 2002 they went down 6.9%, and in 2003, revenues were down 3.8%.
It may be argued that the effect of lower taxes takes time, and in both Bush and Reagan’s second terms, increases of over 10% were seen. To examine this effect, consider the average increase in revenues – Carter – 14.8%, Reagan – 7.4%, Bush I – 5.1%, Clinton – 8%, and Bush II – 3.7%. Reagan came very close to average, while Bush II increased revenues by the smallest amount.
After the initial adjustment to new tax rates is past, revenues will usually grow at the normal rate until a new shock hits the system. However, the losses in the early years of tax cuts tend to be cumulative – the losses themselves are never recovered. In the first three years of Bush II, revenues went down $240 billion. It took until 2005 before revenues recovered to 2000 levels. If revenues had grown at the average rate of 7.4%, revenues under Bush II would have been 3.2 trillion, not the 2.5 trillion that was collected.
OK Republicans. I’ve shown you mine. Show me your proof.
Perhaps the Republicans should take a class in Economics or Math. I know that they hate science, but it really come in handy when you’re trying to run a country.