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November 30, 2010

Contrary To What Obama And The Dems Claim, Cutting Taxes On Rich 'Always' Increases Revenues (Proven by four former U.S. presidents)

Topics: Political News and commentaries

Politics Deaily reports that the top Republicans in Congress came out of today's meeting with President Obama saying that today's conversation at the White House was "frank" and "useful" and yielded an agreement by the president to begin negotiations on the future of the Bush tax cuts, now on track to expire at the end of the year.

In other words, the only thing that came out of the meeting is that Obama and the GOP leadership have agreed to negotiate, nothing more. Meanwhile, Obama and the Democrat leadership are still stuck on the historically disproven idea that cutting tax (rates) on the rich will somehow reduce revenues, hike the deficit, and be fiscally irresponsible.

However, as Michael Eden pointed out in detail back in September of this year, it's the same tired, and totally incorrect liberal argument that's been played over and over again; in fact, examining the history of our greatest tax-cutting presidents - Coolidge, Kennedy, Reagan, and Bush - proves that the Dems' claim is a great lie and that lowering tax rates (even though in the case of the Bush tax cuts we're talking about simply keeping the same rate - it's not a tax cut) will always result in increased revenues.

In a nutshell:

The income tax cuts enacted during the administrations of Calvin Coolidge in the 1920s, Kennedy-Johnson in the 1960s, Ronald Reagan in the 1980's and the [a]dministration of George Bush have all resulted in total tax revenues increasing as there is not only more income available to tax in the top brackets, but the fact that additional jobs created are created for people in the lower tax brackets means that the number of new workers in the lower brackets have increased the pool of income subject to taxation in these brackets as well .

However, politicians are addicted to spending and, in each of the recent tax cuts, Congress has gone on a spending binge every time the revenues from tax cuts increased. This is where we are getting the warnings about growing deficits as the opponents of tax cuts first project spending increasing at the current rate and then project how much more income could be raised by reversing the tax cuts and restoring rates to the old levels while assuming, incorrectly, that the amount of taxable income will remain the same. Of course, income will go down as people, when faced with higher taxes on the extra income, will cut back on working and investing.

Related video: The Laffer Curve, Part I: Understanding the Theory:

The Laffer Curve charts a relationship between tax rates and tax revenue. While the theory behind the Laffer Curve is widely accepted, the concept has become very controversial because politicians on both sides of the debate exaggerate. This video shows the middle ground between those who claim "all tax cuts pay for themselves" and those who claim tax policy has no impact on economic performance. This video, focusing on the theory of the Laffer Curve, is Part I of a three-part series. Part II reviews evidence of Laffer-Curve responses.

Related video:The Laffer Curve, Part II: Reviewing the Evidence

Related video: Life on the Downside of the Laffer Curve

And if you really want to get angry, watch The Laffer Curve, Part III: Dynamic Scoring

Other related:
The Historical Lessons of Lower Tax Rates
The Pros and Cons of the Bush Tax Cuts. Do they really favor the wealthy or is that a myth?
Don't Laugh At Laffer
End of Prosperty, Hello Welfare State

Posted by Richard at November 30, 2010 1:42 PM

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