What Mitt Romney Said Last Night About Tax Cuts And The Deficit Was Absolutely Right. And What Obama Said Was Absolutely Wrong.

Mitt Romney repeatedly said last night that he would not allow tax cuts to add to the deficit.  He repeatedly said it because over and over again Obama blathered the liberal talking point that cutting taxes necessarily increased deficits.

Romney’s exact words: “I want to underline that — no tax cut that adds to the deficit.”

Meanwhile, Obama has promised to cut the deficit in half during his first four years – but instead gave America the highest deficits in the history of the entire human race.

I’ve written about this before.  Let’s replay what has happened every single time we’ve ever cut the income tax rate.

The fact of the matter is that we can go back to Calvin Coolidge who said very nearly THE EXACT SAME THING to his treasury secretary: he too would not allow any tax cuts that added to the debt.  Andrew Mellon – quite possibly the most brilliant economic mind of his day – did a great deal of research and determined what he believed was the best tax rate.  And the Coolidge administration DID cut income taxes and MASSIVELY increased revenues.  Coolidge and Mellon cut the income tax rate 67.12 percent (from 73 to 24 percent); and revenues not only did not go down, but they went UP by at least 42.86 percent (from $700 billion to over $1 billion).

That’s something called a documented fact.  But that wasn’t all that happened: another incredible thing was that the taxes and percentage of taxes paid actually went UP for the rich.  Because as they were allowed to keep more of the profits that they earned by investing in successful business, they significantly increased their investments and therefore paid more in taxes than they otherwise would have had they continued sheltering their money to protect themselves from the higher tax rates.  Liberals ignore reality, but it is simply true.  It is a fact.  It happened.

Then FDR came along and raised the tax rates again and the opposite happened: we collected less and less revenue while the burden of taxation fell increasingly on the poor and middle class again.  Which is exactly what Obama wants to do.

People don’t realize that John F. Kennedy, one of the greatest Democrat presidents, was a TAX CUTTER who believed the conservative economic philosophy that cutting tax rates would in fact increase tax revenues.  He too cut taxes, and he too increased tax revenues.

So we get to Ronald Reagan, who famously cut taxes.  And again, we find that Reagan cut that godawful liberal tax rate during an incredibly godawful liberal-caused economic recession, and he increased tax revenue by 20.71 percent (with revenues increasing from $956 billion to $1.154 trillion).  And again, the taxes were paid primarily by the rich:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So we get to George Bush and the Bush tax cuts that liberals and in particular Obama have just demonized up one side and demagogued down the other.  And I can simply quote the New York Times AT the time:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.”

The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

And of course the New York Times, as reliable liberals, use the adjective whenever something good happens under conservative policies and whenever something bad happens under liberal policies: “unexpected.”   But it WASN’T “unexpected.”  It was EXACTLY what Republicans had said would happen and in fact it was exactly what HAD IN FACT HAPPENED every single time we’ve EVER cut income tax rates.

The truth is that conservative tax policy has a perfect track record: every single time it has ever been tried, we have INCREASED tax revenues while not only exploding economic activity and creating more jobs, but encouraging the wealthy to pay more in taxes as well.  And liberals simply dishonestly refuse to acknowledge documented history.

Meanwhile, liberals also have a perfect record … of FAILURE.  They keep raising taxes and keep not understanding why they don’t get the revenues they predicted.

The following is a section from my article, “Tax Cuts INCREASE Revenues; They Have ALWAYS Increased Revenues“, where I document every single thing I said above:

The Falsehood That Tax Cuts Increase The Deficit

Now let’s take a look at the utterly fallacious view that tax cuts in general create higher deficits.

Let’s take a trip back in time, starting with the 1920s.  From Burton Folsom’s book, New Deal or Raw Deal?:

In 1921, President Harding asked the sixty-five-year-old [Andrew] Mellon to be secretary of the treasury; the national debt [resulting from WWI] had surpassed $20 billion and unemployment had reached 11.7 percent, one of the highest rates in U.S. history.  Harding invited Mellon to tinker with tax rates to encourage investment without incurring more debt. Mellon studied the problem carefully; his solution was what is today called “supply side economics,” the idea of cutting taxes to stimulate investment.  High income tax rates, Mellon argued, “inevitably put pressure upon the taxpayer to withdraw this capital from productive business and invest it in tax-exempt securities. . . . The result is that the sources of taxation are drying up, wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people” (page 128).

Mellon wrote, “It seems difficult for some to understand that high rates of taxation do not necessarily mean large revenue to the Government, and that more revenue may often be obtained by lower taxes.”  And he compared the government setting tax rates on incomes to a businessman setting prices on products: “If a price is fixed too high, sales drop off and with them profits.”

And what happened?

“As secretary of the treasury, Mellon promoted, and Harding and Coolidge backed, a plan that eventually cut taxes on large incomes from 73 to 24 percent and on smaller incomes from 4 to 1/2 of 1 percent.  These tax cuts helped produce an outpouring of economic development – from air conditioning to refrigerators to zippers, Scotch tape to radios and talking movies.  Investors took more risks when they were allowed to keep more of their gains.  President Coolidge, during his six years in office, averaged only 3.3 percent unemployment and 1 percent inflation – the lowest misery index of any president in the twentieth century.

Furthermore, Mellon was also vindicated in his astonishing predictions that cutting taxes across the board would generate more revenue.  In the early 1920s, when the highest tax rate was 73 percent, the total income tax revenue to the U.S. government was a little over $700 million.  In 1928 and 1929, when the top tax rate was slashed to 25 and 24 percent, the total revenue topped the $1 billion mark.  Also remarkable, as Table 3 indicates, is that the burden of paying these taxes fell increasingly upon the wealthy” (page 129-130).

Now, that is incredible upon its face, but it becomes even more incredible when contrasted with FDR’s antibusiness and confiscatory tax policies, which both dramatically shrunk in terms of actual income tax revenues (from $1.096 billion in 1929 to $527 million in 1935), and dramatically shifted the tax burden to the backs of the poor by imposing huge new excise taxes (from $540 million in 1929 to $1.364 billion in 1935).  See Table 1 on page 125 of New Deal or Raw Deal for that information.

FDR both collected far less taxes from the rich, while imposing a far more onerous tax burden upon the poor.

It is simply a matter of empirical fact that tax cuts create increased revenue, and that those [Democrats] who have refused to pay attention to that fact have ended up reducing government revenues even as they increased the burdens on the poorest whom they falsely claim to help.

Let’s move on to John F. Kennedy, one of the most popular Democrat presidents ever.  Few realize that he was also a supply-side tax cutter.

Kennedy said:

“It is a paradoxical truth that tax rates are too high and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now … Cutting taxes now is not to incur a budget deficit, but to achieve the more prosperous, expanding economy which can bring a budget surplus.”

– John F. Kennedy, Nov. 20, 1962, president’s news conference

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“Lower rates of taxation will stimulate economic activity and so raise the levels of personal and corporate income as to yield within a few years an increased – not a reduced – flow of revenues to the federal government.”

– John F. Kennedy, Jan. 17, 1963, annual budget message to the Congress, fiscal year 1964

“In today’s economy, fiscal prudence and responsibility call for tax reduction even if it temporarily enlarges the federal deficit – why reducing taxes is the best way open to us to increase revenues.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

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“It is no contradiction – the most important single thing we can do to stimulate investment in today’s economy is to raise consumption by major reduction of individual income tax rates.”

– John F. Kennedy, Jan. 21, 1963, annual message to the Congress: “The Economic Report Of The President”

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“Our tax system still siphons out of the private economy too large a share of personal and business purchasing power and reduces the incentive for risk, investment and effort – thereby aborting our recoveries and stifling our national growth rate.”

– John F. Kennedy, Jan. 24, 1963, message to Congress on tax reduction and reform, House Doc. 43, 88th Congress, 1st Session.

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“A tax cut means higher family income and higher business profits and a balanced federal budget. Every taxpayer and his family will have more money left over after taxes for a new car, a new home, new conveniences, education and investment. Every businessman can keep a higher percentage of his profits in his cash register or put it to work expanding or improving his business, and as the national income grows, the federal government will ultimately end up with more revenues.”

– John F. Kennedy, Sept. 18, 1963, radio and television address to the nation on tax-reduction bill

Which is to say that modern Democrats are essentially calling one of their greatest presidents a liar when they demonize tax cuts as a means of increasing government revenues.

So let’s move on to Ronald Reagan.  Reagan had two major tax cutting policies implemented: the Economic Recovery Tax Act (ERTA) of 1981, which was retroactive to 1981, and the Tax Reform Act of 1986.

Did Reagan’s tax cuts decrease federal revenues?  Hardly:

We find that 8 of the following 10 years there was a surplus of revenue from 1980, prior to the Reagan tax cuts.  And, following the Tax Reform Act of 1986, there was a MASSIVE INCREASE of revenue.

So Reagan’s tax cuts increased revenue.  But who paid the increased tax revenue?  The poor?  Opponents of the Reagan tax cuts argued that his policy was a giveaway to the rich (ever heard that one before?) because their tax payments would fall.  But that was exactly wrong.  In reality:

“The share of the income tax burden borne by the top 10 percent of taxpayers increased from 48.0 percent in 1981 to 57.2 percent in 1988. Meanwhile, the share of income taxes paid by the bottom 50 percent of taxpayers dropped from 7.5 percent in 1981 to 5.7 percent in 1988.”

So Ronald Reagan a) collected more total revenue, b) collected more revenue from the rich, while c) reducing revenue collected by the bottom half of taxpayers, and d) generated an economic powerhouse that lasted – with only minor hiccups – for nearly three decades.  Pretty good achievement considering that his predecessor was forced to describe his own economy as a “malaise,” suffering due to a “crisis of confidence.” Pretty good considering that President Jimmy Carter responded to a reporter’s question as to what he would do about the problem of inflation by answering, “It would be misleading for me to tell any of you that there is a solution to it.”

Reagan whipped inflation.  Just as he whipped that malaise and that crisis of confidence.

This might explain why a Gallup poll showed that Ronald Reagan is regarded as our greatest president, while fellow tax-cutting great John F. Kennedy is tied for second with Abraham Lincoln.  Because, in proving Democrat policies are completely wrongheaded, he helped people.  Including poorer people who benefited from the strong economy he built with his tax policies.

Let’s move on to George Bush and the infamous (to Democrats) Bush tax cuts.  And let me quote none other than the New York Times:

Sharp Rise in Tax Revenue to Pare U.S. Deficit By EDMUND L. ANDREWS Published: July 13, 2005

WASHINGTON, July 12 – For the first time since President Bush took office, an unexpected leap in tax revenue is about to shrink the federal budget deficit this year, by nearly $100 billion.

A Jump in Corporate Payments On Wednesday, White House officials plan to announce that the deficit for the 2005 fiscal year, which ends in September, will be far smaller than the $427 billion they estimated in February.

Mr. Bush plans to hail the improvement at a cabinet meeting and to cite it as validation of his argument that tax cuts would stimulate the economy and ultimately help pay for themselves.

Based on revenue and spending data through June, the budget deficit for the first nine months of the fiscal year was $251 billion, $76 billion lower than the $327 billion gap recorded at the corresponding point a year earlier.

The Congressional Budget Office estimated last week that the deficit for the full fiscal year, which reached $412 billion in 2004, could be “significantly less than $350 billion, perhaps below $325 billion.” The big surprise has been in tax revenue, which is running nearly 15 percent higher than in 2004. Corporate tax revenue has soared about 40 percent, after languishing for four years, and individual tax revenue is up as well.

[Update, September 20: The above NY Times link was scrubbed; the same article, edited differently, appears here.]

Note the newspaper’s use of liberals favorite adjective: “unexpected.” They never expect Republican and conservative polices to work, but they always do if they’re given the chance.  They never expect Democrat and liberal policies to fail, but they always seem to fail every single time they’re tried.

For the record, President George Bush’s 2003 tax cuts:

raised federal tax receipts by $785 billion, the largest four-year revenue increase in U.S. history. In fiscal 2007, which ended last month, the government took in 6.7% more tax revenues than in 2006.

These increases in tax revenue have substantially reduced the federal budget deficits. In 2004 the deficit was $413 billion, or 3.5% of gross domestic product. It narrowed to $318 billion in 2005, $248 billion in 2006 and $163 billion in 2007. That last figure is just 1.2% of GDP, which is half of the average of the past 50 years.

Lower tax rates have be so successful in spurring growth that the percentage of federal income taxes paid by the very wealthy has increased. According to the Treasury Department, the top 1% of income tax filers paid just 19% of income taxes in 1980 (when the top tax rate was 70%), and 36% in 2003, the year the Bush tax cuts took effect (when the top rate became 35%). The top 5% of income taxpayers went from 37% of taxes paid to 56%, and the top 10% from 49% to 68% of taxes paid. And the amount of taxes paid by those earning more than $1 million a year rose to $236 billion in 2005 from $132 billion in 2003, a 78% increase.

Budget deficits are not merely a matter of tax policy; it is a matter of tax policy AND spending policy.  Imagine you have a minimum wage job, but live within your means.  Then you get a job that pays a million dollars a year.  And you go a little nuts, buy a mansion, a yacht, a fancy car, and other assorted big ticket items such that you go into debt.  Are you really so asinine as to argue that you made more money when you earned minimum wage?  But that’s literally the Democrats’ argument when they criticize Reagan (who defeated the Soviet Union and won the Cold War in the aftermath of a recession he inherited from President Carter) and George Bush (who won the Iraq War after suffering the greatest attack on US soil in the midst of a recession he inherited from President Clinton).

[To read that article in its entirety, click here].

When Romney said that the small businesses that create jobs was going to be hurt by Obama’s taxes, he was RIGHT.  In a different article available here, I document the facts from official sources and then say:

Out of 27,281,452 total firms, 21,351,320 are listed as “nonemployer firms.”  Which means that 78.23 percent of all small businesses hire ZERO employees.   So when Obama says that 97% of small businesses won’t be affected by his tax hike, please understand that the whopping majority of those businesses that won’t be affected aren’t hiring anybody.  Another 3,617,764 small businesses have no more than four employees.  Those small businesses that hire zero workers plus those small businesses that hire no more than four workers constitute 91.5% of ALL small businesses.

Here’s a more relevant way to look at it.  When you consider the businesses that employ more than four people, you are looking at businesses that hire 94.97 percent of ALL the workers who work for small businesses.  And while not all of the small businesses that hire between 5-9 employees are going to be paying higher taxes as a result of Obama’s class warfare on small businesses, most of them do.  And virtually none of the businesses that hire more than ten employees are going to earn less than $250,000 a year.

Romney pointed out in the debate that half of all jobs created by small business and a quarter of ALL THE JOBS CREATED IN AMERICA would have their income taxes skyrocket under Barack Obama.

When Romney said that Obama’s taxation was going to destroy 700,000 small business jobs, he was RIGHT.

Which is why 85% of small businesses agree with Romney and disagree with Obama that Obama’s policies have led America down the wrong track.

Which is why 64% of small businesses are saying they plan to simply wait Obama out rather than create jobs while he’s trying to ruin them.

Obama deceitfully talks about giving tax cuts to small businesses when in fact he is actually massively taxing them.

Obama IS helping small businesses … into BANKRUPTCY.  And Obama says the recession is behind us while small businesses are going belly up in droves.

Romney absolutely crushed Obama in the debate last night.  Nobody had EVER won a debate by the margin that Romney won by in the history of CNN.  If you have any decency and care about people who need a job and love this country at all, please cast your vote for Mitt Romney.

Tags: Calvin Coolidge, cut tax rates, Debate, deficit, George W. Bush, income taxes, JFK, Kennedy, no tax cut that adds to the deficit, October 3, Ronald Reagan, small business owners, small businesses, tax rates