Meanwhile, tax revenues have been rising. In 2003, federal revenues equaled 16.1 percent of our economy. Two years later, that percentage had climbed to 17.4 -- then to 18.6 the following year. Instead of starving our government of funds, the correct type of tax cuts have stimulated growth and thus increased overall tax revenue.
There’s still more to do, of course. After the capital-gains rate was cut in 2003, capital gains tax revenues doubled. Lawmakers should consider just eliminating this tax, which amounts to an unfair form of double taxation.
Unfortunately, the prevailing political winds are blowing the other way. Consider an environmental measure, sponsored by Sens. Joe Lieberman, I-Conn., and John Warner, R-Va., that lawmakers plan to take up this month.
Its backers portray it as a way to combat global warming, but it’s really just a massive tax hike. The goal is to increase the cost of energy, so people will be forced to use less of it. In short, it would hit every American right in the wallet.
Recently, The Heritage Foundation’s Center for Data Analysis (CDA) projected the economic costs of the “Lieberman-Warner” bill. Under it, our country would lose some 500,000 jobs per year, eventually wiping out all the gains from the 2003 tax cut.
At the same time, the Heritage study found, the average household will pay $467 more each year for its natural gas and electricity (in inflation-adjusted 2006 dollars). That’s the equivalent of a couple weeks’ worth of groceries -- gone.
With the economy slowing and politicians nervous about unemployment numbers, it makes little sense to even talk about hiking taxes and slowing growth.
Instead, lawmakers should celebrate this anniversary by locking in the benefits of the 2003 tax cuts. They should make them permanent. (They’re set to expire starting in 2011.) That’s the surest way to guarantee many happy returns.