Since many liberals are calling for new massive tax increases as a part of the debt ceiling deal congress is fighting over right now I figured it might be a good time to review some of the results of the last major attempt at tax reform. The Bush tax cuts that is.
So, what exactly does the data show us about how they performed?
First off we need to understand that the revenues resulting from tax structures are completely dependent on the state of the economy. Of course the opposite is viewed by everybody from across the political spectrum to be true as well. To make things fair I’ll be comparing the best year in terms of (inflation adjusted to 2005 dollars) tax revenues from the pre-Bush tax cuts era and our current era.
Following this rule the best pre-Bush tax cuts year on record for (inflation adjusted) tax revenues was under Clinton in 2000. The best year on record for (inflation adjusted) tax revenues under the Bush tax cuts was 2007.
Now one of the most common standards used by liberals (and even some conservatives) for how well a tax structure is doing is how much money it brings in as a percentage of GDP. In other words many judge a tax structure by how much of the economy it eats up.
This. Is. Absurd.
A tax structure ought to be judged by how many (inflation adjusted) dollars it can bring in. Ideally you could even go a bit further and say the best tax structure brings in the most revenue with the smallest burden on the economy. After all shouldn’t the goal of an efficient tax system be to get the most money with the least affect on the economy?
By either of these standards 2007 bests 2000. In 2007 tax receipts (in 2005 dollars) totaled $2.414 trillion where as 2000 tax receipts (in 2005 dollars) only totaled $2.310 trillion. Additionally in 2007 taxes were only 18.5% of GDP but in 2000 they were 20.6% In other words the best year after the Bush tax cuts was better than the best year before them.
The fact is in 2007, under the Bush tax cuts, we had a larger economy AND greater tax revenue than at any time since at least 1940 which is as far back as the Tax Policy Center keeps score.
We could certainly go around in circles forever debating the pros and cons of theoretical tax systems and I certainly wouldn’t say that our current tax structure, even post Bush tax cuts, is the ideal. However, it is extremely important to take a look at how real world reforms have performed and exactly what that means. This time around the facts clearly show us that a real world conservative supply side tax reform has produced a better, more efficient, and more effective tax system.
UPDATE: For a slightly revised and expanded version of this theory check out my op ed over at Human Events!
3 thoughts on “Repealing the Bush Tax Cuts Would Lead to Lower Tax Revenues”
How stupid can you be?
In 2007, $5 trillion was psent on National Defense, Security appratus etc and it spurred tremondous Economic groth.. FACADE.
It was on borrowed money, andresulted in a transfer to the investmetn holders from tapyers, unfunded. Sure, this high paying jobs resulted in increased tax reneune, but you opnly get a 10% increase in the tax revenue for the 100% that is spent.
GO back to your high school economic and repeat it. You are simply a nearsighted moron, that the like of HE, ACU, YR loves to hold dear.
I have to agree with you when you say that repealing the cuts will lower tax revenue, but I also have to mention that tax increases coming from the current party in power could lead to even less jobs in the marketplace for someone like me hoping to find a job out of college. Instead of companies reaping the benefits of low taxes (which leads to more job opportunities),the federal government is receiving money that it will more than likely misuse.
While raising taxes seems like a good idea according to the current administration, I personally have trouble with those ideas as a potential member of the workforce after graduation. With the lack of jobs available due to less money available for major companies, there are fewer jobs available for hard working individuals like myself.