The Wall Street Jour…

The Wall Street Journal has further details about how the tax cuts have not only cause the rich to pay more in taxes, but how this has helped the economy. They start with a realistic assessment of claims by both sides (and what claims hold little to no merit), and then launch into a list of good things that have happened because of the cuts.

The real news, and where the policy credit belongs, is with the 2003 tax cuts. They’ve succeeded even beyond Art Laffer’s dreams, if that’s possible. In the nine quarters preceding that cut on dividend and capital gains rates and in marginal income-tax rates, economic growth averaged an annual 1.1%. In the 12 quarters–three full years–since the tax cut passed, growth has averaged a remarkable 4%. Monetary policy has also fueled this expansion, but the tax cuts were perfectly targeted to improve the incentives to take risks among businesses shell-shocked by the dot-com collapse, 9/11 and Sarbanes-Oxley.

This growth in turn has produced a record flood of tax revenues, just as the most ebullient supply-siders predicted. In the first nine months of fiscal 2006, tax revenues have climbed by $206 billion, or nearly 13%. As the Congressional Budget Office recently noted, “That increase represents the second-highest rate of growth for that nine-month period in the past 25 years”–exceeded only by the year before. For all of fiscal 2005, revenues rose by $274 billion, or 15%. We should add that CBO itself failed to anticipate this revenue boom, as the nearby table shows. Maybe its economists should rethink their models.

Indeed they should. Or a least learn from history, especially from the Reagan tax cuts. Predictably, liberals are looking for the cloud in the silver lining.

This would all seem to be good news, but some folks are never happy. The same crowd that said the tax cuts wouldn’t work, and predicted fiscal doom, are now harrumphing that the revenues reflect a windfall for “the rich.” We suppose that’s right if by rich they mean the millions of Americans moving into higher tax brackets because their paychecks are increasing.

Individual income tax payments are up 14.1% this year, and “nonwithheld” individual tax payments (reflecting capital gains, among other things) are up 20%. Because of the tax cuts, the still highly progressive U.S. tax code is soaking the rich. Since when do liberals object to a windfall for the government?

When a Republican is sitting in the Oval Office, of course!

Filed under: Uncategorized

Like this post? Subscribe to my RSS feed and get loads more!