Writing in the Atlanta Journal Constitution, syndicated radio host Neal Boortz perpetuated the myth that tax cuts increase revenue to bolster his argument that the Bush tax cuts “worked.” Economists have said the Bush tax cuts reduced revenue and had little positive impact on the economy.
Boortz: The Bush Tax Cuts “Worked” And “Revenues Increased”
Boortz Argued That The Bush Tax Cuts “Worked” And “Tax Revenues Increased.” Arguing that the Bush tax cuts “worked,” Neal Boortz wrote:
Here's something else you might not remember about the Bush tax cuts. Congress thought it would be a good idea to phase these tax cuts in over several years. Didn't work. The economy continued to shed jobs, so the Congress decided to let the tax cuts take effect immediately, and threw in a cut in capital gains and dividends to boot. It worked. Eight million jobs were created and tax revenues increased.
Did you catch that? Tax revenues increased after a tax cut. Democrats just hate this, but increased revenues are the norm after tax cuts. Why? Because tax cuts spur economic growth. The CBO said that the Bush tax cuts would lower 2006 revenues by $75 billion. Oops! Wrong again! Revenues actually increased by $47 billion. What about jobs? In the 18 months before the Bush tax cuts our economy lost 267,000 jobs. In the 18 months following the cuts it added over 300,000 jobs. In the next 19 months another 5 million jobs were added. [Atlanta Journal Constitution, 6/24/11]
Economists: Bush Tax Cuts Reduced Revenue And Did Not Spur Economic Growth
CBPP: Bush Tax Cuts Cost $1.7 Trillion In Reduced Revenue. From the Center on Budget and Policy Priorities:
Bush-era tax cuts -- Through 2011, the estimated impacts come from adding up past estimates of various changes in tax laws -- chiefly the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA), the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), the 2008 stimulus package, and a series of annual AMT patches -- enacted since 2001. Those estimates were based on the economic and technical assumptions used when CBO and the Joint Committee on Taxation (JCT) originally “scored” the legislation, but the numbers would not change materially using up-to-date assumptions. Most of the Bush tax cuts are scheduled to expire after December 2010 (partway through fiscal 2011). We added the cost of extending them, along with continuing AMT relief, from estimates prepared by CBO and JCT. (We did not assume extension of the temporary tax provisions enacted in ARRA.) Together, the tax cuts account for $1.7 trillion in extra deficits in 2001 through 2008, and $3.4 trillion over the 2009-2019 period. Finally, we added the extra debt-service costs caused by the Bush-era tax cuts, amounting to more than $200 billion through 2008 and another $1.7 trillion over the 2009-2019 period -- over $330 billion in 2019 alone. [The Center on Budget and Policy Priorities, 6/28/10]
CBO: Extending The Bush Tax Cuts Would Increase Deficits By $2.6 Trillion Over 10 Years. In January 2010, the nonpartisan Congressional Budget Office estimated that extending the tax cuts enacted in 2001 and 2003 would increase deficits by $2.6 trillion between 2011-2020. [Congressional Budget Office, January 2010]
Krugman: Extending The Bush Tax Cuts Would Reduce Revenue By $4 Trillion. Nobel laureate and New York Times columnist Paul Krugman, opposing efforts to extend the Bush tax cuts, wrote:
We're talking about almost $4 trillion in lost revenue just over the next decade; over the next 75 years, the revenue loss would be more than three times the entire projected Social Security shortfall. So giving in to Republican demands would mean risking a major fiscal crisis -- a crisis that could be resolved only by making savage cuts in federal spending.
And we're not talking about government programs nobody cares about: the only way to cut spending enough to pay for the Bush tax cuts in the long run would be to dismantle large parts of Social Security and Medicare. [The New York Times, 12/5/10]
Gale: “The Bush Tax Cuts Would Account For A Significant Chunk Of” Projected Deficits. William Gale, a Brookings Institution senior fellow and co-director of the Tax Policy Center, wrote:
The deficits we face over the next decade reflect a fundamental imbalance between spending and revenue, one that goes beyond entitlements. Based on projections by the CBO, Alan Auerbach of the University of California at Berkeley and myself, among others, even if the economy returns to full employment by 2014 and stays there for the rest of the decade, the continuation of current fiscal policies, including the Bush tax cuts, would lead to a national debt in the range of 90 percent of GDP by 2020. That's already the highest rate since just after World War II -- and Medicare, Medicaid and Social Security aren't expected to hit their steepest spending increases until after 2020.
According to these same projections, the yearly deficit would rise to 6 to 7 percent of GDP by 2020. The Bush tax cuts would account for a significant chunk of this, considering that in each year they are in effect, the revenue lost because of them amounts to nearly 2 percent of GDP.
Compounding the problem: By increasing the government's debt, the tax cuts have already led to higher interest payments on that debt. So even if all of the cuts expire on Dec. 31, we will still be paying for them for years to come. [Washington Post, 8/1/10]
FactCheck.Org: Revenue Would Have Been Higher Without Bush Tax Cuts. FactCheck.org concluded on June 11, 2007, that “it is clear” the Bush tax cuts of 2001 and 2003 “did not 'increase revenues'” as Sen. John McCain had claimed. The post further stated:
The Congressional Budget Office, the Treasury Department, the Joint Committee on Taxation, the White House's Council of Economic Advisers and a former Bush administration economist all say that tax cuts lead to revenues that are lower than they otherwise would have been -- even if they spur some economic growth. [FactCheck.org, 6/11/07]
Former Bush Economist: "[N]o Dispute Among Economists" That Bush Tax Cuts Reduced Revenue. The Washington Post reported on October 17, 2006:
“Federal revenue is lower today than it would have been without the tax cuts. There's really no dispute among economists about that,” said Alan D. Viard, a former Bush White House economist now at the nonpartisan American Enterprise Institute. “It's logically possible” that a tax cut could spur sufficient economic growth to pay for itself, Viard said. “But there's no evidence that these tax cuts would come anywhere close to that.” [The Washington Post, 10/17/06]
Thoma: The Evidence Is “Not Favorable” That The Bush Tax Cuts Led To Economic Growth. Mark Thoma, an economist at the University of Oregon, wrote:
For example, according to this Census report (see table A1), median household income in 2007, adjusted for inflation, was lower than it was in 2000. And as the non-partisan Center on Budget and Policy Priorities reports, based upon data from the Bureau of Labor Statistics, employment growth was particularly weak, “with employment and wage and salary growth ... lower than in any previous post-World War II expansion. Employment grew at an average annual rate of only 0.9 percent from November 2001 to September 2007, as compared with an average of 2.5 percent for the comparable periods of other post-World War II expansions. In addition, real wages and salaries grew at a 1.8 percent average annual rate in the 2001-2007 expansion, as compared with a 3.8 percent average annual rate for the comparable periods of other post-World War II expansions.”
Thus, there is little evidence to support that the Bush tax cuts had a significant effect on growth. In addition, contrary to the argument that the tax cuts would pay for themselves being made at the time the tax cuts were enacted, the deficit ballooned as a result of the tax cuts. [MoneyWatch.com, 11/30/10]