Invalid Tax Theory Abounds

I heard it yet again twice today. This time clearly state don Lou Dobbs Tonight and eluded to on Hannity and Colmes. It is the seemingly honest statement that the Bush tax cuts are the cause of the current deficits. The problem is that this common opinion is absolutely false. It is a perfect example of repeating a lie so often that you being to believe it and it becomes truth. But how hard would it be to verify this fact. Relatively simple if only the IRS published such details… oh wait they do.

What do these numbers tell us. They tell us that the economy was shrinking. The recession of the late nineties had been compounded by the terrorist attacks of 2001. So the first stage of tax cuts were passed. Revenue from individual income receipts was down by 140billion from 2001-2002. 2003 dropped another 50 billion. This alone would seem to prove the point that revenues were dropping because of the Bush tax cuts. But the economy was beginning to turn.

Looking at corporate taxes in those years reveals an interesting difference. Taxes from corporate revenues had also dropped by 50 billion dollars from 2000-2001. A year prior to personal income receipts dropping. …I feel, based on the assumed misconceptions, I must connect the obvious dots. Corporate profits were dropping in 2000, unemployment was on the rise, the impact of millions of Americans out of work is then seen in 2002 personal returns…The year following the tax cuts [even if assumed only for the rich] the revenues from corporate taxes was up by 30 billion dollars. That was short-lived and in 2003 they dropped back again by 30 billion dollars. Am I still contradicting my own point? Well let’s move forward.

In 2003 the Bush Administration said that the economy was not recovering fast enough and they did what? They cuts taxes again…and revenue from both corporate and personal income taxes rose; by 35 billion and 3 billion respectively. A modest rise for personal incomes but companies were growing again. So in the following year (2005) corporate tax receipts were up another 77billion dollars and personal up 117billion. They continued to rise in 2006 (C:+73billion, P:+199billion and 2007 (C:+15billion, P:+140Billion).

In total, this amounts to over 1.5 Trillion more dollars of tax revenue to the federal government over the years from 2004-2007. I know this contradicts conventional thinking… or at least what your have been told over and over again. But the facts are the facts. Revenue to the federal government is based almost solely on the GDP of the economy (growth or contraction) and had little to nothing to do with tax rates. This has been tracked by Kurt Hauser since 1950.

It may take some time to let is soak in and for some it never will.

So know the economy is in trouble again. Companies are losing money… the next step should be obvious to all… higher unemployment… and less revenue to the federal government. So what is the next step raise taxes in the hopes that those revenues can be gathered in a slowing economy, or drop taxes rates…especially on companies to get the economy back in gear and let revenues follow as they always do.


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