Hannity, Matalin falsely claim that cutting taxes raises revenues

››› ››› CHRISTINE SCHWEN

On Hannity & Colmes, Sean Hannity and Mary Matalin falsely claimed that cutting taxes raises revenues. In fact, several former and current Bush administration economists have stated that tax cuts -- including those passed under President Bush -- produce a net decrease in revenue. For example, Treasure Secretary Henry Paulson said during his confirmation hearing, "As a general rule, I don't believe that tax cuts pay for themselves."

During the September 30 edition of Fox News' Hannity & Colmes, Republican strategist Mary Matalin asserted that Sen. John McCain would "freeze spending" and "lower taxes, because it creates jobs and it creates wealth back -- revenues back to the government." She later started to say, "[E]very time we cut taxes, we --" but was interrupted by co-host Sean Hannity, who finished: "We raise revenues." However, McCain's own senior policy adviser (and former chief economist for President Bush's Council of Economic Advisers), Douglas Holtz-Eakin, has disputed the claim that tax cuts create a net increase in revenues. As director of the Congressional Budget Office in 2005, Holtz-Eakin released a study of a 10-percent federal income tax cut, which concluded that "the budgetary impact of the economic changes was estimated to offset between 1 percent and 22 percent of the revenue loss from the tax cut over the first five years and add as much as 5 percent to that loss or offset as much as 32 percent of it over the second five years." In other words, during the first five years of a 10-percent tax cut, the resulting economic impact on the budget would offset at most 22 percent of the federal revenues lost and during the second five years would offset at most 32 percent of the revenues lost. Holtz-Eakin also reportedly told Boston Globe columnist Scot Lehigh, "You are not going to get tax cuts to pay for themselves." Holtz-Eakin is not alone. As Media Matters for America has noted, several Bush administration economists have disputed the notion that cutting taxes raises revenue:

  • During his June 2006 confirmation hearing, Treasury Secretary Henry Paulson said, "As a general rule, I don't believe that tax cuts pay for themselves." The financial information website, MarketWatch, reported this statement as "echoing the opinion of most economists."
  • According to a November 15, 2007, Washington Post editorial, Jim Nussle, the director of the Office of Management and Budget, told reporters, "Some say that [the tax cut] was a total loss. Some say they totally pay for themselves. It's neither extreme."
  • In a May 2006 Wall Street Journal op-ed, N. Gregory Mankiw, Harvard University economics professor and former chairman of President Bush's Council of Economic Advisers, wrote: "Some supply-siders like to claim that the distortionary effect of taxes is so large that increasing tax rates reduces tax revenue. Like most economists, I don't find that conclusion credible for most tax hikes, and I doubt Mr. Paulson does either."
  • In an October 17, 2006, article, the Post quoted Alan D. Viard, a former Council of Economic Advisers senior economist under Bush, saying that "[f]ederal revenue is lower today than it would have been without the [Bush] tax cuts. There's really no dispute among economists about that."
  • During his testimony to the Senate Budget Committee in 2006, Edward Lazear, then-chairman of Bush's Council of Economic Advisers, stated: "Will the tax cuts pay for themselves? As a general rule, we do not think tax cuts pay for themselves. Certainly, the data presented above do not support this claim."

From the September 30 edition of Fox News' Hannity & Colmes:

HANNITY: We've got to strengthen the dollar, we've got to create investment opportunities. I'd eliminate the corporate income tax -- just get rid of it.

MATALIN: Yes, yes.

HANNITY: Let's bring business to America and say, "If you come here, you're going to make money, and you're going to get to keep your money." I'd cut the capital gains tax -- the opposite of which direction that Barack Obama wants to go in. Do you wish that we were hearing more of these solutions to the Republicans' plan?

MATALIN: Yes, and my presumption is that, by the next debate, not the vice presidential debate, because it'll be the presidential candidates that will be setting the policy, that McCain -- John McCain -- who started, at least gave the beginning of an answer to how he would -- what he would do in response to having what is at least gonna be a short-term cost to the taxpayers -- is that he'd freeze spending. Well, then the next step is to lower taxes, because it creates jobs and it creates wealth back -- revenues back to the government, starting with taxes, and do capital gains and expand that. Every time -- we have to keep teaching history over and over -- going back to Jack Kennedy, every time we cut taxes --

HANNITY: We raise revenues.

MATALIN: -- we --

HANNITY: We raise revenue. All right, here's my next question.

Posted In
Economy, Taxes
Network/Outlet
Fox News Channel
Person
Sean Hannity, Mary Matalin
Show/Publication
Hannity & Colmes
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