When you tax something more you get less of it. When you tax something less you get more of it.
The AP pointed out this week that, "…The Congressional Budget Office is forecasting that this year's deficit will be around $300 billion, significantly below a previous estimate of $350 billion, reflecting significant increases in tax revenues, reflecting the strong economy. Through the first eight months of the current budget year, which began on Oct. 1, government revenues have totaled $1.545 trillion, up 12.9 percent from a year ago….”
Looks to me like Art Laffer’s counterintuitive, low-tax approach to maximizing economic growth, while simultaneously generating enormous revenues in Uncle Sam’s coffers is still alive and well. To think otherwise defies history and common sense.
Higher after-tax returns to work, invest, and take entrepreneurial risks promotes greater capital formation, employment, and wealth. To put it simply: Americans produce more when it pays.
Unfortunately, (despite a mountain of evidence to the contrary) most Democrats still stubbornly cling to this idea that Americans needs higher taxes. Why these tax-crazed zealots refuse to acknowledge the resounding success of lower tax rates throughout the years is beyond me.
In the 1920s, the Harding-Coolidge-Mellon tax cuts produced the Roaring Twenties. But repeated tax increases by Hoover and FDR (along with that protectionist stain, “Smoot-Hawley”) sent the economy to the basement in the Great Depression.
JFK got the economy booming again by cutting taxes in the 1960s, following the lethargic growth of the high-tax Truman-Eisenhower years. Fast-forward a couple decades to the Reagan Revolution, when “The Gipper” entered the Oval Office and bid fond farewell to stagflation by slashing taxes. Reagan cut the top personal tax rate from 70 percent to 28 percent, allowed Americans to keep more of what they worked hard to earn, and unleashed an economic boom whose reverberations are still being felt today.
Bill Clinton raised taxes in his first term, but lowered them in his second. These tax cuts led to an unmistakable burst of investment and growth. Consider this: In Clinton’s first four years, the economy increased at a 3.2 percent annual rate. After his second term tax cuts, the economy grew at a 4.2 percent clip. Coincidence? I think not.
Why Democrats remain committed to reaching further into our pockets, and refuse to finally admit that lower taxes strengthen the link between effort and reward is beyond my pay grade. Our capitalist free-market system has proven that tax cuts work, time and time again.
Just look at history.