We were told time and time again by the Republicans in the South Carolina debate last night that tax cuts create more government revenue than we otherwise would have had. Larry Kudlow on his CNBC show constantly hits on this theme throughout his hour of blatant right-wing self congratulatory nonsense. However, what is the truth behind this so-called "Supply-Side Theory"? The truth is....not much.
I decided to run the numbers on the non-Social Security budget as this is the revenue brought in by the personal income tax, the capital gains tax, the corporate income tax, and so on. These are all of the taxes manipulated in our fiscal policy. I used the presidencies of two Supply-Side presidencies, Ronald Reagan and George W. Bush vs. the tax-raising Bill Clinton. The split in the results is nothing short of stunning:
Clinton Years
Receipts 1993: $842 billion
Receipts 2001: $1.483 trillion
Growth: 76%
Bush Jr. Years
Receipts 2001: $1.483 trillion
Expected 2009: $ 2.086 trillion
Growth: 40.6%
Reagan Years
Receipts 1981: $469 billion
Receipts 1989: $727 billion
Growth: 55%
These results are conclusive and unquestionable. The Supply-Side experiments do not work as advertised. It is true, revenue did not drop overall, but it sure as hell did not increase more than one would expect. Is it true that an optimal tax rate for collecting revenue and stimulating the economy exists? Probably, but it is not obtained by just slashing taxes as low as you can get them. Would we have more revenue than ever if we had 1% taxes? No, because the economy would have to grow over 20-fold to get the same amount of revenue. The same applies for smaller tax cuts.
I will post more about this later.
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2 comments:
Typical Republicans lying out of their asses.
You may want to check this out You have some interesting points, though I'm not sure your analysis is irrefuatable...
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