But the fastest way to boost federal revenues is to cut taxes, which in turn strengthens economic growth. When President Kennedy's tax cuts were enacted in the early 1960s, government tax revenues rose as the economy grew at a faster rate, yielding a budget surplus by the end of the decade. Ronald Reagan's tax cuts in the 1980s led to higher tax revenues as well, and also stimulated an economic boom that led to a 20-year bull market. The budget surplus and economic surge in the late 1990s under President Clinton came after the Republican Congress got him to cut the capgains rate, which led to an explosion of investment in the technology industry. The Bush income tax-rate cuts in this decade, including a lower capital gains rate, similarly pushed federal revenues to new highs and in the process slashed a projected deficit in half.
We're going through an economic rough patch now, but throughout this decade the entire economy grew from about $12 trillion to $14 trillion. Notably, John McCain thinks raising taxes on businesses (including small businesses who pay taxes at the top rate that Obama would impose), would weaken our economy even further.
Last week he laid out an economic-growth plan that would follow in the footsteps of Kennedy, Reagan and Bush. Among its provisions: the abolition of the alternative minimum tax (AMT) that would be largely paid by 25 million middle-income families; the doubling of the personal tax exemption for dependents from $3,500 to $7,000; the cutting of the estate tax by raising the tax exemption on estates up to $10 million and lowering the tax rate to 15 percent; the decrease of the federal corporate tax rate to 25 percent from 35 percent, (the second highest corporate tax rate among the world's industrialized countries); the overhauling of the tax code to make the system fairer, flatter and simpler, with an alternative tax system of no more than two tax rates with a generous standard deduction; and the retention of lower tax rates on capital gains and dividends to spur savings, investment and venture-capital formation, in the interest of business and employment expansion.
Over the past seven years, Democrats have been condemning the Bush tax cuts "for the rich" when those tax cuts reduced rates across the board from lower-income Americans to those at the top of the income scale. But Obama and Hillary Clinton said something in last week's debate that may not be widely known among most Americans: they would keep all the Bush tax cuts for taxpayers making less than $250,000.
Sounds like they're saying that almost all of Bush's tax cuts were a good idea to begin with.