Raise Taxes!

So I turned to the editorial section of the Atlanta Urinal and Constipation and what do I see but this editorial advocating (what else?) tax increases. That is the liberal solution to every problem: raise taxes and raise spending. Milton Friedman once stated that if raising taxes would balance the budget, the budget would have been balanced years ago.

But let's see what the tax cuts have produced. For that we need to read this column by Pete DuPont.

Of course they have it backwards. President Bush's personal income, capital gains and dividend tax rate reductions have created economic growth, significantly increased government tax receipts, and reduced the federal deficit by nearly $130 billion. As the New York Times was forced to admit in its front-page headline on July 9, a "Surprising Jump in Tax Revenues Curbs U.S. Deficit." But it isn't surprising at all; the truth is that when tax rates go down, economic activity goes up.

Yep SRF©'s like me get to keep more of our money and we then turn around and reinvest it so we make even more money and pay even more taxes. That's what I'm doing. Even though I'm retired, I'm still investing my money, and paying more taxes on my investments. When I make more money, the gummint makes more money.

Mr. Bush signed the most recent tax cuts into law in the spring of 2003. In the past 33 months the size of America's entire economy has increased by 20%--or, as National Review Online's Larry Kudlow put it, "In less than three years, the U.S. economic pie has expanded by $2.2 trillion, an output add-on that is roughly the same size as the total Chinese economy."

That's the economy that's supposed to surpass us, you know, like the Japanese were supposed to kill us in the 90's. By the way, that $2.2 trillion is also larger than the French economy.

And what about the EU? We're supposed to worry about them also and many of their subsidized businesses, like Airbus. How's the A380 project going? Right on schedule? No cost overruns? Boeing is just loving this.

In the 2 1/4 years before the 2003 tax cuts, economic growth averaged 1.1% annually; in the three years since it has averaged 4% per year, and in the first quarter of this year it was 5.6% on an annualized basis. Inflation-adjusted per capita GDP has grown 7.8% from 2003 through the first quarter of this year.

That means companies make more money and pay more taxes.

According to the government's establishment survey, in the 36 months since the tax cuts became law, 5.3 million new jobs have been added to the economy. According to its employment survey, 288,000 jobs were added in May and 387,000 in June. The unemployment rate dropped from 6.1% when the bills were signed to 5.4% at the end of 2004 and 4.6% today, and the rate has gone down for men, women, blacks and Hispanics. Hourly wage rates for workers are up 3.9% in the past year, and they increased at an annualized rate of 4.6% in the second quarter of this year, the highest quarterly rate in nearly 10 years.

More workers. More taxpayers.

Incomes are up too. As Stephen Moore noted in The Wall Street Journal, "the percentage of Americans earning more than $50,000 a year rose from 40.8% to 44.2%" between 2002 and 2004. As for very wealthy families, the portion of total income "captured by the richest 1%, 5% and 10% of Americans is lower today than in the last year of the Clinton administration."

But I thought it was only the eeeeevil rich who benefitted from the tax cuts.

All this has been good news for the government. Federal tax receipts increased by 15%-- $274 billion--last year and 13%-- $206 billion--in the first nine months of this fiscal year, which, as the Journal points out, means the nine-month increases for the past two years represent the highest growth rates in 25 years. Looking ahead to the end of this fiscal year, total inflation-adjusted government receipts will likely be 23% above 2003 when the Bush tax cuts were signed into law.

Now if only the Republicans and the president would quit spending like Dimocrats they could really cut the deficit. Alas, I'm dreaming.

Reducing the capital gains tax rate from 20% to 15% increased capital gains tax receipts by 79% from 2000 to 2004. Cutting the dividend tax rate by more than half--from 39.6% to 15%--increased dividend tax receipts by 35% from 2002 to 2004. And corporate tax receipts have nearly tripled since 2003, reaching $250 billion for the past nine months, 26% higher than the same period last year.

Tax cuts work, and work well, for individuals, employers and even the government, which sees its revenues increase dramatically when tax cuts are enacted and left in place over time.

I discovered this guy a few months ago and he has completely changed the way I feel about our national debt. He also happens to have the Best Debt Clock on his sidebar. By the way, France, Germany, Italy, and Japan's debt to GDP ratio is higher than ours. China's is lower.

I was gonna write him and ask him some questions about our balance of trade deficit and he answered most of the questions I was gonna ask in his latest post.

I am lucky to live in the wealthiest nation in the history of this planet. We have a vibrant growing economy with low inflation and low unemployment. We don't need to increase taxes. We do need to cut spending.

Posted by denny at July 27, 2006 10:24 PM