No, The Bush Tax Cuts Have NOT Generated Higher Revenues

Surely, you would agree that an increase in tax on some product, which is the same as raising its price, would decrease its sales and, thus, decrease its revenue. Therefore, a decrease in tax would have the opposite effect. When we earn income we are merely buying dollars with our labor, if the dollars are taxed more, less will be purchased and, therefore, less taxes collected. If the dollars are taxed less, more will be purchased and revenue will increase. The same applies for capital gains, or, dollars purchased with risk.

Since 2003, federal tax receipt have increased, roughly, at an average rate of 8 percent per year, in addition, individual tax receipts, as in individuals who buy dollars with labor and risk, have increased 46.3 percent in the last four years, which seems to agree with the above.

Bassman,

See the two excerpts in my post from Charles Wheelan. I think that should clarify things for you. But in short, revenues are a function of two factors: The tax base multiplied by tax rates. Tax cuts generally expand the former and, by definition, reduce the latter. The question is how these changes net out -- i.e., is there enough incremental expansion of the tax base to fully compensate for the lower rates. And the answer is apparently "no" at tax rate levels that are realistic in the U.S.

As for revenues having gone up in the last few years, this correlation is certainly not proof of causation. There are many factors that affect GDP growth/decline other than tax rates -- monetary policy being one notable factor, and rates were aggressively cut a few years ago. The increases in revenues are most likely DESPITE the Bush tax cuts rather than BECAUSE of them even in part. The consensus among economists is that revenues would have been even higher, and would be higher today, if the Bush tax cuts had not taken place.

As follow-up to my last comment, the Fed very aggressively lowered interest rates throughout 2001 (from 6.00% in January, 2001 to 3.50% in August and 1.75% in December, and then down to 1.00% in June, 2002) and rates remained very low into 2004 (2.25% in December, 2003, 2.75% in March, 2004). There is, of course, a lag effect of these changes on the economy (estimates vary; some say lag effect can be from 6 months to 2 years).

I offer the above just as a relevant FYI. I'm not suggesting that Fed policy alone is responsible for the increases in tax revenues over the past few years. The Bush tax cuts, on the other hand, are highly UNLIKELY to have caused, or even contributed to, these revenue increases. On the contrary, the revenue increases are despite the negative impact of the Bush tax cuts.

Is that your position? Tax cuts can not generate more revenue if they are not balanced with budget reductions. it is the equivalent of you getting a pay cut and then going out and spending more money.

The tax cuts have improved peoples lives. They put more money in their pockets. I care not a wit if they put more revenue in the governments coffers.

First, my pointing out a matter of economics -- the degree of revenue feedback effect from the Bush tax cuts -- is not an argument for or against raising taxes. It's just a correction of a false assumption. This correction reveals one drawback of the Bush tax cuts, and presumably one benefit of raising taxes. It says nothing about other considerations, nor about what our policy should be.

As for your not caring "a wit if [tax cuts] put more revenue in the government's coffers", well, in the long run whatever we spend we must pay for (albeit "we" as a population; to some extent the taxation for current spending will fall on future generations), so you certainly should care about the amount of revenue that government receives relative to spending and debt levels (particularly debt-to-GDP). To say otherwise is simply myopic: it's not being in favor of lower taxes, but rather in favor of shifting more of the tax burden to the future.