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]

Oh crap, you've done it again Bonddad. Now we'll have to suffer through Mormondude again. Up is down and down is up. Don't confuse me with the facts; I'm in my own reality. Reagan is God and everything is somebody else's fault. Crap.

[BillZBubb]

Bonddad, it is even worse than the chart depicts since the massive debt (and the interest on it)created by the tax cuts further reduce the useable future tax revenue stream.

Thanks to Reagan and the Republicans we are sitting on top of a monumental debt the interest on which is a huge chunk of annual government expenses.

[Craig]

Correction:

-open up the Strategic Petroleum Reserve not National Petroleum Reserve.

[Overd0g]

That a relief, given that the government is about 2x the size it needs to be. Hopefully the cuts won't be "paid for".

[Craig]

The only mechanisms two in place to stimulate the economy immediately are related to oil:

-suspend the federal tax on gasoline.
-open up the National Perroleum Reserve.

Both temporary, and at the same time will offset the inherent increase in oil due to the declining dollar. The Fed needs to track the 3-month T bills as it always does despite some posturing. Rates are headed mush lower and oil is headed higher. Oil may not react higher if we are in a recession and demand declines significantly here and abroad.

Supply of oil and consumer prices of gasoline are resources available to the government to help taxpayers and influence the economy. Sounds like an extension of the role of the Federal Reserve?

[IsaacKuo]

You're forgetting about what happened in 1984. Walter Mondale told the truth about taxes. Reagan lied about taxes. The result was a historic landslide defeat. No one wants to be the next Mondale, so every politician repeats the Reagan lies about taxes.