Quote:
You said...."Essentially, if you can't cut spending to offset revenues lost in a tax cut, don't cut taxes."
Wrong. Instead of losing revenue, cutting taxes actually INCREASED revenues.
|
Not exactly. When adjusted for inflation and labor force growth, it's actually a significant decline. The tax cuts targeted income taxes - personal income, capital gains and dividends (mainly benefiting the wealthy). Examine revenues from this source from 2000 through 2006. Page 3:
http://www.cbo.gov/budget/historical.pdf
2000: 1,005
2006: 1,044
This is a 3.9% increase in actual dollars. However, accumulated inflation during this time period has been around 18%. In addition, labor force growth (those available to work) has increased about 6%. More potential workers generally means more taxes collected and more demand for outlays. Thus, adjusting for these 2 factors shows that revenues from income taxes actually have dropped about 20%. Contrast this to a 111% increase in actual dollars from 1992-2000. Adjusting for these 2 factors still nets a very strong surge, in part due to a tax increase on high-income taxpayers in 1993, one that had no noticeable negative effect on the economy.
http://data.bls.gov/cgi-bin/cpicalc.pl
ftp://ftp.bls.gov/pub/special.requests/lf/aat1.txt
A third factor is related to demographics. Baby boomers have reached peak earnings, thus bringing in more revenues to the treasury. This factor will reverse soon.
A fourth factor is government spending. Outlays have increased 62% in actual dollars (well beyond inflation and labor force growth). A benefit that partially offsets the cost is that the spending can generate tax revenues. Giving bonuses to those who sign their life away to Iraq results in more taxes collected, for instance. Interesting that neocons don't cite this benefit to the war.
The other 2 sources of revenue (besides income taxes) that have boosted overall revenues are payroll and corporate taxes. Payroll tax revenues continue to increase in part to the first 3 factors mentioned. There's been no tax cut in this area. Corporate taxes collected (a small portion of overall taxes collected comes from corporate taxes) have increased substantially. Corporate taxes have not been cut. In fact, the modest progressive tax brackets (designed to help small businesses) have not even been adjusted for inflation the way personal tax brackets are each year. If you've read this far and are interested, I can provide a source for this. The result is more corporate tax income being subject to higher rates, a subtle form of a tax hike. Overriding this, however, are the record corporate profits we've seen from big oil and companies doing war-related business. War does temporarily boost economic growth although it's not a net long-term benefit.