Tax cuts make money

[Montgomery Burns]

If done correctly, tax cuts generate more govt revenue

Many people in Washington have long known a dirty little secret about tax-cut measures: When done right, they actually result in more money for the government. Ever since the Senate approved the last major tax relief bill, in 2003, revenues have increased every year. In 2004, they went up 5.5%. Last year, they rose 14.5%, the largest increase in nearly 25 years.

Total government collections, in fact, increased more after President Bush's 2003 tax cuts than they did after President Clinton's 1994 tax hikes.

In 2000 and 2001, the end of the dot-com bubble, the 9/11 attacks and a series of corporate scandals sent the economy into a tailspin. During the downturn, high taxes limited economic growth and kept receipts down. Although Americans were making some of the largest per-household tax payments in our nation's history, revenues plummeted in 2002 and 2003. When the major tax-relief measures kicked in, they restored the economy to health and helped deliver quarter after quarter of strong growth.

Republicans' decision to reduce taxes on capital gains and dividends provides a good case study in effective tax policy. When we enacted these measures in 2003, the Congressional Budget Office estimated that revenues would decline by $27 billion over the next two years. Instead, it turned out that the tax cut stimulated investment and increased revenues by $26 billion — a $53 billion difference.

Which brings to mind some Clinton quotes after he implemented the biggest tax hike in American history:

"To middle-class Americans who have paid a great deal over the last 12 years and from whom I ask a contribution tonight..." --Bill Clinton, announcing the largest tax increase in history, SOTU address, 2/17/93

"Probably there are people in this room still mad at me at that budget because you think I raised your taxes too much. It might surprise you to know that I think I raised them too much too." --Bill Clinton, remarks at Houston fund- raiser, 10/17/95

"I take full responsibility, proudly, for what we did. It [raising taxes] was the right thing to do." --Bill Clinton, press conference, 10/19/95

[geoffrey]

Nope, zip, wrong, incorrect. It's written by Bill Frist himself!! Of course he's going to support it!

It takes many many years of a low tax economy in order to fulfill the Laffer argument if thats what your trying to make. Lowering taxes today won't give you more money tomorrow... maybe a decade away though!

As well, the deficit spending of the current government pours more money into business and this increases the revenue from the tax base! If you spend spend spend, your sure to get more back from business.

Heres some bedtime reading for anyone that wants to fall asleep quickly on the issue:

http://www.cbo.gov/ftpdocs/69xx/doc6908/12...rcentTaxCut.pdf

[Slavik44]

I think there are some major faults that need to be pointed out.

The first being that Correlation is not Causation, I went to the gym the other day and had a great work out I also wore my new red shirt, it doesn't exactly mean that my red shirt caused me to have a great work out. So I feel that right from the begining we are entering this with the wrong perspective, we are enterign thsi assuming something that hasn't been prooven, that tax cuts caused this. In the end I think there is a much more plausible solution. Investment is generally very, very, very sensitive, so a terrorist attack a corporate scandal, and a bursting bubble, all in a amtter of a year or two can scare away investers and drive the economy to the brink of reccession or just plain all out recession. As the situation stablizes, no terrorist attacks, fewer corporate scandals, etc... investment is going to come back, the economy is going to pick up pace after falling off track for a number of years. Therefore you would expect as the economy naturally picks up the pace, tax revenue will increase, because there is more financial activity in a more stable economy, then if that economy was unstable. So while tax cuts can help fuel economic growth, I wonder if the example you gave is made weak by the third paragraph that says "In 2000 and 2001, the end of the dot-com bubble, the 9/11 attacks and a series of corporate scandals sent the economy into a tailspin." When the economy recovers fallen tax revenue will increase anyways. So in my opinion good point, but bad example.