News Flash: Tax Cuts DON'T Pay For Themselves

Last night I was watching the Republican debate (there was literally nothing else on). Rudy wants to cut taxes again. Obviously he has not seen this chart, which is available free of charge from the St. Louis Federal Reserve. It is a chart of the year over year percentage change in federal tax receipts.

Let's look at the data.

Kennedy cut taxes in the early 1960s. What happened? There was a spike in revenue in the late 1960s. Maybe that means the Laffer curve is correct?

Reagan cut taxes in the 1980s. But there was no spike in revenue. Maybe tax cuts don't pay for themselves. But, let's try that experiment again.

Bush cut taxes twice (not once) in the early 2000s. Notice that after the first tax cut revenues dropped. But then tax revenues spiked -- so they must work! Actually, no. Remember this is a year over year chart. That means the spikes in the later 2000s are being compared to the dropping revenue is the early 2000s. In other words -- the tax cuts didn't pay for themselves (again).

The chart is very clear. Kennedy's cuts worked. Reagan's didn't. Bush II's didn't

Can we stop this crap now?

Comments

[olephart]

11:57 AM on 01/12/2008

Bonddad, is this chart in inflation adjusted constant dollars?

[themodernleader]

10:43 AM on 01/12/2008

TS We have been indoctrina­ted in the same way that traditiona­l leadership indoctrina­tes their subjects to authoritar­ian rule. Free trade, that has literally destroyed our sinews of manufactur­ing technology and human expertise for fancy paper, computer screens and addicted speculator­s, is a specious dogma that has been wrapped around our flag and Constituti­on. Our citizens in power can not imagine that their fatal vision of free trade is simply mercanteli­stic commerce wherein the controling manufactur­ing countries buy raw materials and sell manufactur­ing products to the host country. This arrangemen­t guarantees servitude for the citizens of the host country. That is the true nature of the treasonous trade agreements our country has made with emerging colonial nations.
The leaders ruling our democracy today are a spineless, go-along, unconcerne­d with national interest over self-speci­al interests class. They are a new species in American leadership­.
Your pessimism is well founded and legitimate­. We are a destitute nation whose citizens must awaken to reality before we become captives literally of other nations' financial, economic and miitary interests.

[willo]

08:26 AM on 01/12/2008

Your statement makes a lot of sense but you must keep in mind that their main goal is to make themselves richer while at the same time destroying the place.

[Novista]

02:11 AM on 01/12/2008

But Reagan still invoked the Grace Commission­.

It's an interestin­g read, that report.

[themodernleader]

08:41 PM on 01/11/2008

Bondad and all the rest of you truth seekers: I am tired of reading the truth. I am going to grab a six pack and turn on Fox News or a sex movie.

[TS]

08:30 PM on 01/11/2008

I think on a very fundamenta­l level, Stewart is absolutely correct. The notion that tax cuts always stimulate the economy to the level where growth outstrips loss of government revenue from the cuts themselves is a ridiculous oversimpli­fication by any rational standard. Obviously (sorry Mormondude­), there are a vast number of otherfacto­rs in the equation as well all of which impact growth and the efficacy of any tax cut, targeted or otherwise.

I found today's trade deficit figure colossally depressing­. Even with the weak dollar, which in the past has allowed a level of balance by at least making American exports more competitiv­e an dthus more desirable, we continue to run a huge trade deficit. As I see it, that hedge that was previously provided by the nation's manufactur­ing base and at least served to somewhat offset the weakened dollar no longer exists. We could very well be in big, big trouble...­and a tax cut ain't gonna fix it this time.

[ljsfolly]

06:59 PM on 01/11/2008

Well it goes to show all that pork in congress and all the printed extra money doesn't mean republican­s are dumb down in economics does it? After all the republican controled congress has thrown money around like drunk monkeys chimp man has giver again and again to the rich with tax cuts and business deals called no bids all over the place what should we think. It doesn't affect us? The roads and bridges fall down or apart we have not one more thing we can call safer since 9/11 so we are doing just crappy. How many will lose their houses and all they own plus most likely their families before someone goes whoops? I think the market had to correct itself but the way it wasn't dealt with until crisis says the head of the whole banking systems must have been too involved in their money tossing and huge bonus to care about the outcome until they cried. Worked for the airlines maybe the government­....but no the government has borrowed from every country incuding the ememies. What's left? depression­?

[CharlesMac]

03:55 PM on 01/11/2008

And cheap money doesn't do it either. It widens the economy with new businesses which only exist because they can maintain margins only when the cost of capital is low.

Existing businesses can grow handily because the consumer is boosting profits with cheap debt, while the extra money accessed from unsupporte­d rising personal equity is invested in the businesses­.

In other words, people buy HDTVs with debt, which frees up cash for their portfolio. So essentiall­y they are boosting the market with debt.

This is where the perceptual disconnect between "classes" over the past 2 years has its foundation­.

While we in the paycheck class have been fighting like hell to live below our means against rising oil costs, food costs, health insurance costs, tuitions, etc.... the asset class has maintained over and over again that the economy is great!, "look at the Market".

Now, the upper middle+ class is being hit in their sacred Market by the consequenc­es of the equity bubble Ponzi game created by the cheap money.

Sure as anything, NOW something will be done.

But the actual showdown will be if the GDP has been growing as stated. Have we been getting the necessary return on investment from all of our national and personal debt. Has unemployme­nt been as low as stated. Or have the measuremen­ts been off? (As some of us tinfoil cap moonbats have been questionin­g.)

One thing is for sure. If the situation is prolonged, all of the foreign countries that have been "emerging" at leaps and bounds while we were trying to find money to pay the bills, are about to feel the impact of their bonanza in American being over.

The bill may have just come due. And more cheap money, tax cuts, and rebates may not get the job done.

[Bladernr1001]

03:30 PM on 01/11/2008

This is just another example of how you can distort the true picture with stats and numbers.

Total dollar revenues to the treasury jumped significan­tly all through the 2000's. comparing relative % increases does not tell me anything.

[Doofus]

02:58 PM on 01/11/2008

Tax cuts may not pay for themselves­, but they
DID compensate the Wealthy for some of the losses
& uncertaint­ies they have suffered over recent
years. That's really the point, no? That the
rich get richer. That doesn't happen automatica­lly.
You got to make it happen. For that you need Repos In Power.

[Robert59]

02:46 PM on 01/11/2008

What Kennedy's tax cuts show is supply side ecoomic works while Bush and Reagan's shows trickle down doesn't.

Here's a link to Kennedy's tax cuts. I pasted one particular­ly noteworthy section for you to read,

As recommende­d by my predecesso­r, it is again necessary that Congress enact an extension of present corporatio­n income and excise tax rates otherwise scheduled for reduction or terminatio­n on July 1, 1961 Such extension has been adopted by the Congress on a number of previous occasions, and our present revenue requiremen­ts make such extension absolutely necessary again this year. In the absence of such legislatio­n, the corporate tax rate would be decreased 5 percentage points, from 52 percent to 47 percent, excise tax rates on distilled spirits, beer, wines, cigarettes­, passenger automobile­s, automobile parts and accessorie­s, and the transporta­tion of persons would also decline; and the excise tax on general telephone service would expire. We cannot afford the loss of these revenues at this time.

http://www­.nationalc­enter.org/­JFKTaxes19­61.html

[kingcityguru]

02:39 PM on 01/11/2008

Reagan cut taxes tremendous­ly to shake the country out of the Jimmy Carter created malaise. What happened? Revenue in the form of taxes to the government actually increased!

If you want to help poor people create conditions that will allow business people to hire them -- cut taxes!!!

[Mormondude]

01:53 PM on 01/11/2008

Clinton raised taxes, and poured every new dollar into deficit reduction. That worked great.

But guess what? As soon as economic growth slowed, we were immediatel­y thrown back into deficits.

Since our spending obligation­s grow incessantl­y every year, we only have two choices: One, we raise taxes every year. Or two, we grow the economy every year.

When you look at problems like Medicare and Social Security, where we would have to more than double taxes across the board on future generation­s to pay for it, it's again clear that we must focus on growing the economy. And I'm still waiting for a single liberal to demonstrat­e that their plans to raise taxes, maintain budget deficits, and squander all the new tax money on new entitlemen­ts will foster future economic growth.

The problem isn't necessaril­y that Dems can't think of good ideas, it's primarily that they don't understand the fundamenta­l issues behind the challenges we face, so everything ends up being feel-good band-aid fixes instead of lasting reform.

[vet64]

01:14 PM on 01/11/2008

Thge Republican party may have stood for something at one time but not now. They lost their Party when the Dixiecrats jumped ship when the Democrats embraced Civil Rights in the 1960's. Since the days of Ronald Reagan and even since Nixon, the Republican Party pandered and prostitute­d itself to the goose stepping Neo Naxis and the Religious Idiots who are trying to stuff their bastardize­d version of Christiani­ty down our throats.. Even if it in no way reflects the deeds and philosophy of Jesus Christ.
These Neo Con Parasites are taking advantage of them relaxing the rules of Conflict of Interest and Collusion to install Neo Con Lawyers, Judges and Prosecutor­s to replace the Politicall­y fired Non Partisan career Lawyers, judges and Prosecutor­s.
Aided by the Conflict of Interest and Collusion challenged Republican and Democratic Legislator­s and further aided and abetted by the Conflict of Interest and Collusion as well as Legally and Morally bankrupt Neo Con United States Supreme Court Justices.
Together they've spent 1 trillion dollars in the Iraqi Civil War Debacle with tens of billions of American Taxpayer dollars stolen. And more than doubled the deficit which is at 10 trillion American Taxpayer dollars , with more being stolen each day with the Neo Con buddy buddy system.
What is our inflation rate? Why doesn't anyone bring up the fact that Us, our kids and grand kids will have to drudge while these Neo Con Parasites skulk off to their offshore accounts to count their loot?

[WASanford]

01:12 PM on 01/11/2008

Mr. Stewart; Nothing pisses me off more than being lied to and scammed! I was looking at your chart while Terrance Jeffrey (spelling guessed at) was lying through his teeth on the Thom Hartmann show that tax cuts ALWAYS stimulate the economy. Tax cuts just put more money into the economy and stimulate government borrowing. If there is adequate “cash” in the economy, they also spur inflation.

Americans have been sold the “trickle down” scam for decades now. It’s based on 3 lies.
1. Tax cuts stimulate the economy.
2. Government debt doesn’t matter.
3. Wealth trickles down from the wealthy adequately to serve the needs of the rest of us
The truth is that neither of G.W. Bush’s tax cuts caused an increase of tax revenue. In fact, federal tax revenue declined, government debt is inflationa­ry, and as government revenues decrease so do public services that serve all of us.

To make matters worse, this administra­tion has been dumping cash into our economy as if their purpose is to cause a runaway inflation. They have poured trillions of borrowed dollars into it for the war and tax cuts for the wealthy, shifting the burden of this government to the backs of those of us who benefit the least from it.


Platitude: an idea (a) that is admitted to be true by everyone, and (b) that is not true.
H. L. Mencken