Thursday, December 13, 2012

Tax Cuts Don't Increase Revenues

Another guy has examined the "tax cuts increase revenues" claim and found it false.

Even the often lauded Kennedy tax cut (which cut top rates from 91% to 70%, btw, about where I believe they should be) did not do so, and sometimes the effect of the cut is lumped with the 10% surcharge that was enacted in 1969, which explains 40% of the decade's increase in revenue.  A key point is that there was a doubling of revenues in each decade just from economic (and population) growth.  The tax cuts did what you would expect--they cut revenues.  Obviously Laffer was wrong when he guessed where we were on the tax revenue curve (from Keynes!), and that was with rates of 70%.  The point at which tax cuts would be self funding must be way above 70%, maybe even above 91%.  Anyway, "above 91%" would be consistent with the data.

Reagans cuts brought the top rate down to 50% in 1981, then to 28% in 1986.

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