Thomas Sowell

The New York Times of May 21 featured estimates of how much revenue the federal government is losing as a result of tax cuts, more than $50 billion over a five-year period. Meanwhile, a front-page story in the Wall Street Journal reported the government as receiving "a surge in unanticipated revenue coming from the rich."
There is no contradiction between these two stories. The Times reported estimates, while the Wall Street Journal reported what actually happened. Moreover, there is no real difference in outlook between the writers who wrote these two stories.

To the Wall Street Journal writer, the increased tax revenue from "the rich" was "a windfall for the U.S. Treasury."

There has long been a difference in outlook between the reporters who write up the news for the Wall Street Journal and those who write the same newspaper's editorial page. If the reporter thinks that the increased revenue to the Treasury was "unanticipated," that suggests that she has not been reading the editorial pages of her own newspaper.

For years -- indeed, decades -- the Wall Street Journal's editorial page has repeatedly been arguing that cutting tax rates increases tax revenues. Nor did this idea originate with them. There is a whole school of economists who have been saying the same thing even longer.

There is nothing "unanticipated" about the increased revenue. It was unanticipated by the Congressional Budget Office's estimates but that is why the CBO has come under fire from economists. But apparently none of this has yet registered on the Wall Street Journal's front page reporter.

More than 40 years ago, President John F. Kennedy got Congress to cut tax rates, with the idea that this would provide incentives to change economic behavior in a way that would increase economic growth and individual incomes, and therefore lead to even more tax revenue coming into the Treasury than had been the case under the higher tax rates. That is exactly what happened.

Years later, Ronald Reagan made the same argument and his "tax cuts for the rich" produced the same result. Tax receipts during every year of the 1980s were higher than they had ever been in any year before. Moreover, taxes paid specifically by "the rich" were higher than before, because their incomes rose so much as the economy boomed that they paid more total taxes despite the reduced tax rate.

How surprised should we be that exactly the same thing has happened after tax cuts under the Bush administration? Apparently very surprised if we were front-page reporters for the Wall Street Journal.

Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

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