While perusing the Internet, I saw an article by Iwan Morgan, who is the author of The Age of Deficits: Presidents and unbalanced Budgets from Jimmy Carter to George W. Bush. The author asserted in this article that, “The deficit explosion on his watch was a nasty surprise for Ronald Reagan not a deliberate strategy to reduce government. In his rosy interpretation of Laffer curve theory, the personal tax cuts he promoted in 1981 would deliver higher not lower revenues through their boost to economic growth.” The first sentence is an interesting interpretation, since many leftists believe that Reagan deliberately created deficits to make it more difficult for Democrats in Congress to increase spending. I’m agnostic on that issue, but Morgan definitely errs (or is grossly incomplete) in the second sentence. The Reagan Administration did not employ dynamic scoring when predicting the revenue impact of its tax rate reductions. It is true that the White House failed to predict the drop in revenues, particularly in 1982, but that happened because of both the second stage of the 1980-82 double-dip recession and the unexpected drop in inflation (the Congressional Budget Office also failed to predict both of these events, so Reagan’s forecasters were hardly alone in their mistake). Moreover, Morgain’s dismissal of the Laffer Curve is unwarranted. While several GOP politicians exaggerated the relationship between tax rates, taxable income, and tax revenue, this does not mean it does not exist. The table below, which is based on data from the IRS’s Statistics of Income, shows what happened to tax collections from upper-income taxpayers between 1980 and 1988. Supply siders can be criticized for many things, especially their apparent disregard for the importance of limiting the size of government, but the IRS figures clearly show that lower tax rates were followed by more rich people, more taxable income, and more tax revenue. For those keeping score at home, that’s a perfect batting average for supply-side economics.
Well said, brother! My impression from available data is also that Reagan is the only president in modern times on whose watch federal spending actually stopped growing for a while.
[...] to understand that this doesn’t mean “all tax cuts pay for themselves.” That only happens in very rare cases. Moreover, it would be good if people recognized that there are lots of factors that influence the [...]
[...] to understand that this doesn’t mean “all tax cuts pay for themselves.” That only happens in very rare cases. Moreover, it would be good if people recognized that there are lots of factors that influence the [...]
[...] to understand that this doesn’t mean “all tax cuts pay for themselves.” That only happens in very rare cases. Moreover, it would be good if people recognized that there are lots of factors that influence the [...]
[...] want people to understand that this doesn’t mean “all tax cuts pay for themselves.” That only happens in very rare cases. Moreover, it would be good if people recognized that there are lots of factors that influence the [...]
[...] of (gasp!) a Laffer Curve? To be sure, it is only in rare cases, when tax rates get very high, that researchers find that high tax rates lose revenue. In most cases, the Laffer Curve simply implies that higher tax rates won’t raise as much [...]
[...] of (gasp!) a Laffer Curve? To be sure, it is only in rare cases, when tax rates get very high, that researchers find that high tax rates lose revenue. In most cases, the Laffer Curve simply implies that higher tax rates won’t raise as much money [...]
[...] Could this possibly be an example of that “crazy” concept of (gasp!) a Laffer Curve? To be sure, it is only in rare cases, when tax rates get very high, that researchers find that high tax rates lose revenue. [...]
[...] You can check out this data, straight from the IRS website, showing how those evil rich people paid much more to the IRS after Reagan cut their tax rate from 70 percent to 28 percent in the 1980s. LD_AddCustomAttr("AdOpt", "1"); LD_AddCustomAttr("Origin", "other"); [...]
[...] higher tax rates may even lose revenue and lower tax rates may generate additional receipts. The IRS collected a lot more tax from upper-income taxpayers, for instance, after Reagan slashed the top tax rate from 70 percent to 28 [...]
[...] higher tax rates may even lose revenue and lower tax rates may generate additional receipts. The IRS collected a lot more tax from upper-income taxpayers, for instance, after Reagan slashed the top tax rate from 70 percent to 28 [...]
[...] be fair, though, some folks on the left are open to real-world evidence. And this IRS data from the 1980s is particularly effective at helping them understand the high cost of class-warfare [...]
[...] be fair, though, some folks on the left are open to real-world evidence. And this IRS data from the 1980s is particularly effective at helping them understand the high cost of class-warfare [...]
[...] But if a tax increase imposes a lot of damage and taxpayers have enough flexibility in their financial affairs, then it’s possible that a tax hike can lose revenue (or, as we saw with Reagan’s “tax cuts for the rich,” a well-designed reduction in tax rates can actually generate higher revenue). [...]
[...] But if a tax increase imposes a lot of damage and taxpayers have enough flexibility in their financial affairs, then it’s possible that a tax hike can lose revenue (or, as we saw with Reagan’s “tax cuts for the rich,” a well-designed reduction in tax rates can actually generate higher revenue). [...]
[...] these are some of the reasons why upper-income taxpayers wound up paying more money to the IRS after Reagan cut the top tax rate from 70 percent to 28 [...]
[…] be fair, though, some folks on the left are open to real-world evidence. And this IRS data from the 1980s is particularly effective at helping them understand the high cost of class-warfare […]