Real impact of lower taxes


Run the numbers for yourself
Pete du Pont lays it out.

Economic indicators show that since the 2003 tax cuts the GDP has grown an inflation-adjusted average of 3.3% a year, and eight million new jobs have been created over 44 consecutive months of job growth. Unemployment has fallen 25%, from 6.1% to 4.5%, with strong declines across all ethnic groups. Productivity growth has expanded 2.8% a year since 2001, outstripping the past three decades' average. So according to all these economic indices, the 2003 tax cuts have strengthened the American economy.

The tax cuts have also produced substantial tax revenue increases--14.5% growth in 2005 and 11.7% in 2006. For the first seven months of the current fiscal year, total revenues were up 11.3% over last year, and individual income tax receipts were up by 17.5%. Total tax receipts in April were $70 billion higher than in April 2006.

The Congressional Budget Office and the Congressional Joint Tax Commission estimated that a reduction in the capital gains rate to 15% from 20%, which was passed in 2003, would cost the U.S. Treasury some $5.4 billion over three years. But actual revenues exceeded expectations by $133 billion, so the government profited substantially from our strong economy and the tax rate reduction. In fact, the tax cuts have actually expanded revenues as a percentage of gross domestic product. Over the past 40 years, federal tax receipts have accounted for 18.3% of GDP. That figure was 18.4% in 2006, and the CBO projects it at 18.6% in the current fiscal year.

These revenue increases have also had a positive impact on the federal deficit. Since the 2003 tax cuts the deficit has declined from $413 billion (3.5% of GDP) in fiscal 2004, to $318 billion in 2005, then $248 billion in 2006, and an estimated $150 billion to $200 billion (1.1% to 1.5% of GDP) in the current fiscal year.
Lower tax rates have also produced another important economic change: fewer and shorter recessions. As economist Brian Westbury noted in the Wall Street Journal last month, in "the high-tax, highly regulated years between 1969 and 1982 the economy was in recession 32% of the time. Since then, following Ronald Reagan's tax cuts, and deregulation . . . the U.S. economy has only been in recession 5% of the time."

The article overlooks the most important thing.

Lower taxes mean more money in your pocket which means more economic activity.

— NeoWayland

Posted: Thu - May 24, 2007 at 01:35 PM  Tag


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