Different River

”You can never step in the same river twice.” –Heraclitus

June 12, 2005

Taxes Cut; Tax Collections Surge

Filed under: — Different River @ 5:43 pm

Conservative polticians and economists often claim that if tax rates are reduced, the economy will grow more than enough to make up for it, and tax revenues — the total number of dollars actually collected — will rise. Liberal politicians and pundits routinely use this claim as evidence that conservatives are loony, stupid, or both, and repeatedly claim that tax cuts like Bush’s will cause “spiraling deficits” because there will (they claim) not be enough money coming in to run the government. In fact, there is an article in The Atlantic Monthly which purports to be a “look back” taken in 2016 of the hypothesized history between now and then, based on precisely this notion — that the government would “run out of money” to run the economy — as if the government runs the economy, which is even more absurd than the notion that tax cuts cause revenue cuts.

But I digress.

Clayton Cramer points to this story, which has the latest evidence on this theory:

JUN. 10 2:52 P.M. ET — The government ran a deficit of $35.3 billion in May, a little over half the imbalance of a year ago thanks to a continuing surge in tax revenues, the Treasury Department said Friday.

The government’s monthly budget report showed that the May imbalance was down 43.5 percent from an imbalance of $62.5 billion in May 2004. This year’s deficit was the smallest May imbalance since a deficit of $27.9 billion in May 2001, the last year the government ran a budget surplus.

Through the first eight months of this budget year, which began Oct. 1, the deficit totals $272.2 billion, an improvement of 21.4 percent from the $346.3 billion in red ink run up through the first eight months of the 2004 budget year.

The Congressional Budget Office now says it expects this year’s deficit to decline to around $350 billion, a significant improvement from the all-time high in dollar terms of $412.8 billion set last year.

So, the Bush tax cuts took effect in 2003, and now tax revenues are “surging” and the federal budget deficit is falling.

In other words, the evidence is on the side conservative polticians and economists, and the evidence is on their side. The liberal politicians and pundits just ignore it, or probably don’t even know it. I bet you won’t see any of them discussing these figures in print or on TV.

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