‘Unexpected’ Increase In Tax Revenues: More Confirmation That Lower Taxes Increases Growth/Revenue

I just finished responding to a pair of enjoyable comments from Robbie (here and here).  And Robbie posts an excellent 5:46 minute video of the great economist Thomas Sowell:

As Robbie points out, I say much the same things as Sowell.  What he says about tax rate cuts and increased investment and growth having been proven by four presidents over nearly a century (Calvin Coolidge, John F. Kennedy, Ronald Reagan and George Bush) is exactly what I pointed out in my article “Tax Cuts Increase Revenues; They Have ALWAYS Increased Revenues.”

We just had more confirmation of the effectiveness of tax cuts in INCREASING tax revenues (which means that when the government has lower tax rates, it actually collects MORE in tax revenue than it would were it to have higher tax rates):

WASHINGTON – Treasury Secretary Timothy F. Geithner now is saying that, contrary to his recent dire warnings of “catastrophic economic consequences” should Congress fail to increase the nation’ debt limit, there has been an apparent unexpected increase in projected tax revenue, and the deadline for possible default has been benched until mid-spring.

Allow me to define “unexpected” for you: it is an adjective in Democratese for, ‘We’re too stupid to understand why, and too dishonest to admit it, but conservative economic policies are working.'”

A little more information as to why we had this “unexpected” increase in tax revenue comes out of an interview:

CHIOTAKIS: So how did the Treasury Secretary do this? I mean, I thought the old deadline of July 8th was pretty firm.

GENZER: Yeah, that’s what everybody thought. But Geithner actually got a little help from you and me, Steve — the taxpayers. It seems the IRS actually took in more tax revenue than expected last month.

There was an expectation that was building for the entire second half of 2010 that Republicans would win big in November, which greatly stimulated the stock market:

More than 85 percent of institutional investors see the GOP taking the House next month. While political polls suggest that changes are likely in Washington, a staggering number of professional investors think that the Republicans will win back the House of Representatives in November and that may be adding to their sense of a better business environment going forward. Since government policy error remains the biggest fear of investors, according to the poll, the view of DC trends matters.”

The unemployment rate – which had been steadily going UP, has gone down every month since Republicans were overwhelmingly elected and took over the House.  As I have pointed out in the past:

Here’s an interesting factoid that doesn’t seem to get any mention in the mainstream media: Unless I’m seriously mistaken, the unemployment rate has gone down every month since Republicans took control of The House in January:

Unemployment was if anything going UP.  And then Republicans took over, and whammo.  It started going down.  But Republicans didn’t receive so much as a scintilla of credit from the mainstream media.  It’s just amazing.

One of the things that investors and businesses were looking for from Republicans was their central promise that they would not budge in demanding that the Bush tax cuts be extended.  And as confidence grew that the Republicans would win in November and force Obama to reverse his repeatedly stated intention of pursuing Marxist class warfare and punishing investment, production and growth, people who actually produce in this nation began to act accordingly.

Hence the “unexpected” increase in tax revenue.

Democrats invariably point to the Clinton years as “proof” that the century proving that tax rate cuts increase revenues was just a ninety year fluke.

But the Clinton years actually prove the opposite: conservative policies were right during the Clinton years, too.

First, Clinton and Democrats increased taxes on the top marginal income rates in 1993.  Did wonderful things happen after that?  Well, if you’re a Republican, yes, they most certainly did: as a result of the complete failure of Clinton’s economic policy, 1994 marked the biggest takeover by Republicans in history, with Republicans slaughtering Democrats and taking over both the House and the Senate.

It wasn’t until Clinton reduced the capital gains rates that we really saw the kind of growth that Democrats love to point to.  It wasn’t until AFTER Clinton announced “the era of big government is over.”  And yet the actual reasons for that growth prove that their policies are totally wrong.

With the help of mainstream media propaganda, the American people have largely forgotten that Bill Clinton was forced to say, “The era of big government is over.”  With the help of mainstream media propaganda, the American people have largely forgotten that the “good” Clinton years came as a direct result of Republicans dominating both the House of Represenatives and the United States Senate.  With the help of mainstream media propaganda, the American people have largely forgotten that the “Clinton surplus” was the direct result of the Contract with America and its pledge for a balanced budget – literally over Clinton’s constant attempts to prevent it.

The mainstream media – like the Democrat Party whose propaganda whores they are – WILL NOT tell the truth about such matters.

But here we are again.  Republicans pass tax cuts, and then there’s an “unexpected” increase in revenue.  Just like every single other time.

After George W. Bush passed his tax cuts, we had dishonest and confused liberals reacting as the New York Times did:

“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.”

And 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.

It boils down to this: the more you hate America; the more you hate American economic power; the more you want to see the American people suffer; the more you should vote Democrat.

Now, I mentioned two comments to Robbie.  The other comment was about QE2 and its impact.

QE2 is the economic equivalent of sugar in nutrition.  Will it provide quick energy?  Sure it will.  Will that quick energy come at the expense of future health?  You bet it will.

Right now, as a result of the Obam Federal Reserve’s policy of increasing the monetary supply by buying debt from itself (literally creating money out of thin air), there is more economic activity.  Right now, as a result of this policy, credit rates are lower.  Fewer banks and corporations are going under because of the ready access to cheap money.  Investors see the stability and invest.

We should all feed our children tons of sugar, so we can enjoy the short term bonanza of frenetic activity.

Unless you worry about all the cavities, the weight gains, the diabetes, and of course that huge depressing crash with all of those catastrophic health consequences that necessarily come later..

The first time we ended QE1, the stock market lost 16% of its value in two weeks.  Which is to say it didn’t work the first time for the same reason it won’t work this second time.  Or a necessary third time, etcetera.

One of the more sinister effects of quantitative easing is that it essentially becomes a tax on saving.  You were busy at work putting away as much as you could during a period when your money was worth more.  But now, as a result of artificially increasing the money supply, all that money you accumulated in saving is worth less.  Why is this?  Because you can increase the money supply all you want, but you’ve still got the same finite amount of goods and services.  And when you’ve got twice as many dollars in the money supply as you had before, over time those same goods and services will cost twice as much as before, and so on.

Right now, prices are going up dramatically on virtually everything that matters.  And yet the only ones who refuse to admit it are the federal government and its stauchest mainstream media propagandists who think and report what the Obama regime wants them to think and report.

Meanwhile, the key factor that led to the economic crash in 2008 – the housing market – just had its worst quarter since the darkest depths of that crash.  And as bad as that is, the experts are saying that we are STILL  a ways off from hitting bottom.  Obama hasn’t solved anything.  And economists are described as being in the fetal position over this “unexpected” – (there’s that word again) – development.

It’s just like feeding that little kid sugar: frenetic activity that actually accomplishes nothing, followed shortly afterward by a nasty crash.

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4 Responses to “‘Unexpected’ Increase In Tax Revenues: More Confirmation That Lower Taxes Increases Growth/Revenue”

  1. Gibby Says:


    Excellent writing on the facts on tax. Ha! I need your help. I’m currently debating a friend on Tax cuts. He is sharp and knows economics better than me. He keeps bringing up GDP per capita stats that are showing unfavorable to historical Tad cuts. He’s even showed me GDP per capita numbers that show Carter’s years better than Bush. I really need detailed specific numbers to combat him. Can you help? How can I argue his gdp per capita numbers?

    Thanks ahead of time!


  2. Michael Eden Says:


    It’s rather difficult to respond to someone’s argument when you don’t really know what their argument is.

    The first thing is simply to talk to anyone who lived through the Carter years, and ask them to explain how wonderful those years were. Those years were awful on virtually every level under the sun. And to argue that they were better means that there is rather clearly something wrong with one’s argument. There’s a very good reason that Carter was so massively defeated in 1980. I mean, the guy won 44 out of 50 states (489 to 49 electoral college votes), when it is HARD to defeat a sitting president. Ask your friend to explain those facts. Ask him to explain why the people didn’t want more Carter? And then ask him to explain why that asskicking of Carter actually paled to the asskicking Reagan handed Carter’s VP Mondale (Reagan won 49 states, and 525 to 13 in the electoral college). Ask him why that was. Given what he claims his stat proves.

    I googled “gdp per capita” and “tax cuts” and quickly found this link. And the first chart that the person shows seems to indicate that, heck, boy are tax cuts ever bad, and tax hikes ever good. Let’s ignore the fact that in Europe – where taxes are incredibly high – the economy has been in a perennial slump. And our productivity has dwarfed theirs, and stuff like that. Let’s just focus on the links they CLAIM they get their data from. The second link – the Bureau of Economic Analysis – has figures that are adjusted in terms of 2005 dollars.

    So was Jimmy Carter’s GDP better than Bush’s? Let’s see:

    Carter’s 4 years of GDP (in 2005 dollars):
    24,412 25,503 26,010 25,640

    Bush’s eight years of GDP (in 2005 dollars):
    39,768 40,096 40,711 41,784 42,664 43,391 43,801 43,397

    And the winner is?

    Somehow there is some game-playing going on with Angry Bear’s figures, it would very much seem. You don’t really know what or how, because Angry Bear’s chart just appears by magic, and we’re assurred it came from legitimate data. But I also looked at the population figures at the bottom of the official BEA chart, and – sure enough – Bush’s GDP divided by the population was clearly substantially larger than Carter’s. That’s not a straight “GDP per capita” stat, but it’s close enough.

    “GDP per capita” is not a stat I’ve come across much, or ever really heard discussed much. Is there an “official” stat for it, rather than liberals playing with numbers? Well, here’s something that might be. But it has a rather bizarre conclusion. It would mean that the economy was better during 2009 – which even liberals routinely say was the worst year since the Great Depression – was actually better than any year of measurement. But that’s clearly insane. And anybody with an IQ over a turtle knows that. So what does that GDP per capita thing really tell you?

    I’ve never heard anyone ever say “We’ve got to maximize the GDP per capita.” I’ve never heard OBAMA say, “Our way out of this recession is clearly to maximize our GDP per capita.” It’s a figure that comes out of all kinds of other figures. And given the fact that I looked at three different sites that proposed to offer “GDP per capita” figures, and got three very different numbers, it very much seems that significant differences of opinion emerge on the precise measures to be used on the weights or relative importance that should be attached to the criterion used to determine this figure.

    Here is a site that actually provides the GDP per capita figures in “current US dollars” for the entire world. And it has Carter’s four years as follows:
    13,314 11,991 11,128 10,054 8,979

    And then the six years of record for Bush (it only goes to 2006) as follows:
    43,468 41,348 39,271 37,123 35,820 35,006

    I trust the above chart far more than your friend’s massaged figures, and once again, they certainly seem to indicate that things were hardly better under Carter on that basis. Again, notice the discrepancy in the numbes from the above chart. Which one is right and which one is wrong, or are they both right or both wrong?

    Some statistics are simply not particularly significant indicators of anything; other figures are simply made to be played with. That’s why there’s lies, damn lies and statistics.

    I submit that looking at revenues ACTUALLY collected is a far better measure of the effects of a tax policy on the economy. And my article “Tax Cuts Increase Revenues; They Have ALWAYS Increased Revenues” provides a factual documentation that if you cut tax rates, you end up producing a larger tax base and taking in more revenues.

    I would also ask your friend to explain why John F. Kennedy said this:

    ”Our true choice is not between tax reduction, on the one hand, and the avoidance of large Federal deficits on the other. It is increasingly clear that, no matter what party is in power, so long as our national security needs keep rising, an economy hampered by restrictive tax rates will never produce enough revenue to balance the budget – just as it will never produce enough jobs or enough profits.

    ”In short, it is a paradoxical truth that tax rates are too high today and tax revenues are too low – and the soundest way to raise revenues in the long run is to cut rates now.”

    Ask him to explain why JFK said this:

    “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

    Ask him to explain why the greatest Democrat president said this (in total agreement with Reagan – the greatest Republican president):

    “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”

    “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.

    “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

    It seems rather strange that Jimmy Carter wasn’t on the list of the greatest presidents. Even stranger that the greatest Democrat on the list and the greatest Republican on the list both pasionately believed what your friend claims to have so thoroughly debunked.

    I don’t know how helpful that was.

  3. Gibby Says:

    Wow thanks! Great help. I think he is cherry picking charts and numbers. I’m gonna tell him Russia (using gdp per capita) historically looks better than US. He’s smart but also full of s*-#. He’s been dogging Paul Ryan on the YouTube comments. I’m trying to fight for what I know is right.

    Thanks again!

  4. Michael Eden Says:


    I’m not an economist by any stretch, but I usually know what a dead rat carcass smells like. Good luck with your debate.

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