Four Year Anniversary of the GOP Tax Cuts

John Campbell | May 22, 2007 12:00 PM

This month marks the fourth anniversary of the 2003 Republican tax cuts. Because of this act of Congress, millions of Americans received relief from the death tax, the marriage penalty, taxes on capital gains and dividends , as well as greater deductions under child tax credit. In fact, one year after enactment, 26 million middle-income families received an average tax cut of $950 on their tax returns. Seven million of these beneficiaries were seniors who received an average benefit of $1,231.

My Democratic colleagues like to say that the 2003 tax relief has been the reason for the current federal deficit. This is just not true. Since the tax cuts were enacted revenue to the federal government has increased by 46 percent (this year alone, federal tax revenues are up over 11 percent over the same period last year) or $432 billion. But, if revenue grew so much, you may ask, then why did Congress operate in the red?

Undisciplined spending.

Now, it may seem counterintuitive to think that tax revenue increases when tax rates decrease. But, it's true. Why? Tax cuts stimulate the economy. They change behavior. When you have more money, what do you do with it? You invest it. You spend it. You create jobs, you do all kinds of good things. That's why after the tax relief was enacted, the economy went from flat lining to consistent growth. In fact, since the tax relief became law, 7.8 million new jobs have been created. The unemployment rate has dropped to 4.4 percent (from 6 percent). The stock market has increased by 40 percent – reversing a three-year decline.

The Democrats, however, believe that this 46 percent increase in revenue for the federal government wasn't enough, and that whatever you got, it was too much. They want to take more of what you earn and send it right to Washington. So, when you hear the Democrat's argue that the tax relief has caused the deficit, take their comments with a grain of salt. The numbers show that the tax cuts increased revenue and they encouraged growth in the economy.