I am no expert but wondered if this story isn’t good news for our economy? For those who disagree I would like to see evidence why Tax Cuts are not working.
http://www.realclearpolitics.com/Commentary/com-5_5_05_LK.html
This is terrible news. Increasing tax receipts in the face of decreasing tax rates clearly point to an imminent recession and ultimate doom.
I am off to hoard gold and buy a few new shotguns.
This deserves a bump!!!
This morning’s Washington Post headline reports “Tax Receipts Exceed Treasury Predictions.” Digging underneath the headlines, I found inside the daily Treasury statements that during the April tax payment month non-withheld receipts from capital gains, dividends, stock options, and other sources came to $144 billion, an incredible 29% increase from a year ago. Last year, these receipts fell by 5%.
Consequently, the FY2005 budget deficit should come in around $395 billion, or 3.2% of gross domestic product, calculations that include the military appropriations supplement for the terror war. As a result, the Treasury Department will actually pay down $42 billion in debt during the April-June quarter. Last year they had to borrow an additional $42 billion. Last year’s budget gap was $412 billion, or 3.6% of GDP.
Whether the deficit goes up or down, the Treasury’s new idea to re-open 30-year bond issues is a good one. At historically low interest rates, the whole $4.5 trillion of publicly held national debt, which comes to 37% of GDP, should be refinanced and permanently funded through long-term offerings. Britain, France, and Japan even use 50-year bonds. Why shouldn’t the U.S.? Insurance companies, pension funds, and other institutional investors will gobble up the paper.
But the real story behind the higher tax payment numbers is the successful supply-side experiment that began in the middle of 2003, when investment tax rates were slashed on capital gains and dividends. With new incentives to counter the deflation of investment in 2000-2002, both capital formation and economic growth have come back from the dead over the past 2 years.
Real GDP since the tax cuts has averaged 4.3% at an annual rate, whereas growth was only 2.4% in the anemic recovery preceding the tax cuts. The latest government data on tax collection for calendar 2004 confirms the tax-cut-led recovery through the explosion of high tax collections at lower tax rates. The Laffer curve is working.
With more people keeping more of what they earn and invest, after-tax, a major new economic boom has been launched. Enormous wealth creation from real estate, stocks, and small business creation is the backbone of this entrepreneurial recovery. Despite naysayers in the mainstream media and parts of Wall St., strong economic expansion will continue for many years.
Supply-siders in the White House and the Republican Congress have the economic story absolutely right. That is why the investment tax cuts have been extended to 2010 from 2008 in the budget resolution. Even the estate tax rate may be cut to 15%, or eliminated altogether, in this Congress.
The biggest economic threat? Will the Keynesians at the Federal Reserve tighten money too much and deflate the boom? Let’s hope the Fed comes to its senses and stops their rate-hiking crusade. Lower tax rates and strong growth are antidotes to inflation. But money-meddling at the central bank will only make matters worse.
Reaganomics!!!
The Laffer Curve when applied is the concept that when taxes are cut then in the long run tax receipts will increase at a faster rate than without the tax cuts due to faster growth in the economy. That’s the good news, the bad news is that it simply doesn’t work unless the dead weight loss of the tax system is an order of magnitude higher than the US’.
Basically what guys like this commentator do is ignore everything else when allocating blame for economic growth and rely on confirmation bias to see the world they way they want.
To really understand, put the Bush years in context:
Administrations in grey experiened a recession.
Note: Regan discarded much of the supply side ideals in his second term.
I would have added productivity increases (which have little to nothing to do with Bush and more to do with the application of R&D begun in the late 90’s) and a few other numbers such as population growth (which paints Bush’s policy in even worse light).
You should add the tax revenues to that table - it would put the Laffer curve and supply-side economics in proper perspective. That is, most reputable economists had and have crapped on the Laffer curve as a conservative’s fantasy, and the numbers prove it.