Posted 10/17/2012 06:58 PM ET
President Obama warned that GOP hopeful Mitt Romney's proposed income-tax cuts will "cost" the government revenue and repeat Bush policies that he says blew up the deficit.
"The centerpiece of his economic plan are tax cuts," Obama said at Tuesday's presidential debate in New York. "That's what took us from surplus to deficit."
He called Romney's tax plan "sketchy," because it promises to raise revenues while slashing personal tax rates from top to bottom. His debate sparring partner, Democratic Sen. John Kerry, went further, calling it a "fraud."
The Obama camp has strenuously opposed Romney's pro-growth strategy, arguing that tax breaks, especially for the wealthy, "rob" programs for the middle class and poor because they don't raise revenues and don't "pay for themselves."
"It has never been done before," Vice President Joe Biden insisted in last week's debate with Romney running-mate Paul Ryan.
"It's been done a couple of times, actually," Ryan shot back.
The data bear out Ryan. In fact, the White House's own numbers put a big wrinkle in its argument.
The historical tables in the back of the latest "Economic Report of the President" show that the Bush tax cuts generated more, not less, federal revenues — a phenomenon that also held true for Presidents Clinton, Reagan and Kennedy.
All four leaders, two Republicans and two Democrats, slashed taxes for top individual earners or investors. And once these rate reductions took effect and began stimulating economic activity, record individual income-tax receipts poured into the U.S. Treasury. (See the charts above.) Revenues increased even after adjusting for inflation and population growth.
Kennedy
Kennedy's major tax cut, which included chopping the top marginal rate to 70% from 91%, became law in early 1964, after his untimely death. It promised to grow the economy and close the budget gap.
"Coming at a time of substantial deficit in the federal budget, this was a startling proposal to many observers," said New York University economist Richard Sylla, co-author of "The Evolution of the American Economy."
To the shock of many naysaying Democrats, the plan worked. The economy grew at an average 5.5% clip, and unemployment fell to 3.8%. In turn, the annual deficit shrank to $1 billion from $7 billion as individual income-tax receipts nearly doubled. (See the chart.)
"Rising income more than offset the decline in income tax rates as far as federal revenue was concerned," Sylla said.
Kennedy and his supply-side advisers "could point to those few who remained unpersuaded that despite the tax cuts — or rather because of the tax cuts — the federal deficits of fiscal 1965 and 1966 were substantially reduced from 1962-64 levels."
Vindicated, the "new economists" proposed even more tax cuts. But President Johnson opted instead for tax hikes, including a 1968 tax surcharge of 10% on everyone's income. Revenues peaked two years later at $90 billion.
Reagan
President Reagan picked up where Kennedy left off, slashing the top personal rate from 70% all the way down to 28%. The historic tax relief triggered record new business start-ups and small-business expansion.
As in the '60s, tax revenues exploded throughout the '80s as the economy boomed. Between 1982, when the first round of Reagan's across-the-board tax cuts went into effect, and 1990, when President George H.W. Bush broke his no-new-taxes pledge, individual tax receipts jumped 57% to $467 billion.
Clinton
Obama says he wants to go back to the higher personal income "tax rates we had when Bill Clinton was president. ... That's part of what took us from deficits to surpluses."
In fact, those budget surpluses didn't materialize until after Clinton in 1997 reluctantly signed a GOP tax bill that cut the capital-gains rate to 20% from 28%.
The result was dramatic. Tax receipts from capital gains ballooned as stock and other capital investment more than tripled.
Between 1996 and 2000, "the increase in capital gains revenues accounted for a little over 20% of the total increase in federal revenues," former Treasury official Bruce Bartlett said.
For the first time, individual tax receipts hit $1 trillion, before peaking in 2000 from the dot-com bust and Clinton recession.
Despite the government taking in more money from lower taxes on investment income, Obama wants to raise those taxes "for purposes of fairness."
Bush II
While Obama claims the Bush tax cuts caused the recession and record deficits, the evidence says otherwise.
After President George W. Bush in 2003 signed the largest tax cut since Reagan — including dropping the top marginal rate to 35% from 39.6% — government receipts from individual income taxes rose from $794 billion to a peak of $1.2 trillion in 2007, when the mortgage crisis began — a jump of 47%.
Stronger economic growth expanded the tax base and brought in so much revenue that Bush more than halved the deficit over that period.
Revenues weren't the source of the problem. Deficits came from the other side of the ledger: spending, which outstripped new revenues.
And for that, both Democrats and Republicans share the blame.
"The centerpiece of his economic plan are tax cuts," Obama said at Tuesday's presidential debate in New York. "That's what took us from surplus to deficit."
He called Romney's tax plan "sketchy," because it promises to raise revenues while slashing personal tax rates from top to bottom. His debate sparring partner, Democratic Sen. John Kerry, went further, calling it a "fraud."
The Obama camp has strenuously opposed Romney's pro-growth strategy, arguing that tax breaks, especially for the wealthy, "rob" programs for the middle class and poor because they don't raise revenues and don't "pay for themselves."
"It has never been done before," Vice President Joe Biden insisted in last week's debate with Romney running-mate Paul Ryan.
"It's been done a couple of times, actually," Ryan shot back.
The data bear out Ryan. In fact, the White House's own numbers put a big wrinkle in its argument.
The historical tables in the back of the latest "Economic Report of the President" show that the Bush tax cuts generated more, not less, federal revenues — a phenomenon that also held true for Presidents Clinton, Reagan and Kennedy.
All four leaders, two Republicans and two Democrats, slashed taxes for top individual earners or investors. And once these rate reductions took effect and began stimulating economic activity, record individual income-tax receipts poured into the U.S. Treasury. (See the charts above.) Revenues increased even after adjusting for inflation and population growth.
Kennedy
Kennedy's major tax cut, which included chopping the top marginal rate to 70% from 91%, became law in early 1964, after his untimely death. It promised to grow the economy and close the budget gap.
"Coming at a time of substantial deficit in the federal budget, this was a startling proposal to many observers," said New York University economist Richard Sylla, co-author of "The Evolution of the American Economy."
To the shock of many naysaying Democrats, the plan worked. The economy grew at an average 5.5% clip, and unemployment fell to 3.8%. In turn, the annual deficit shrank to $1 billion from $7 billion as individual income-tax receipts nearly doubled. (See the chart.)
"Rising income more than offset the decline in income tax rates as far as federal revenue was concerned," Sylla said.
Kennedy and his supply-side advisers "could point to those few who remained unpersuaded that despite the tax cuts — or rather because of the tax cuts — the federal deficits of fiscal 1965 and 1966 were substantially reduced from 1962-64 levels."
Vindicated, the "new economists" proposed even more tax cuts. But President Johnson opted instead for tax hikes, including a 1968 tax surcharge of 10% on everyone's income. Revenues peaked two years later at $90 billion.
Reagan
President Reagan picked up where Kennedy left off, slashing the top personal rate from 70% all the way down to 28%. The historic tax relief triggered record new business start-ups and small-business expansion.
As in the '60s, tax revenues exploded throughout the '80s as the economy boomed. Between 1982, when the first round of Reagan's across-the-board tax cuts went into effect, and 1990, when President George H.W. Bush broke his no-new-taxes pledge, individual tax receipts jumped 57% to $467 billion.
Clinton
Obama says he wants to go back to the higher personal income "tax rates we had when Bill Clinton was president. ... That's part of what took us from deficits to surpluses."
In fact, those budget surpluses didn't materialize until after Clinton in 1997 reluctantly signed a GOP tax bill that cut the capital-gains rate to 20% from 28%.
The result was dramatic. Tax receipts from capital gains ballooned as stock and other capital investment more than tripled.
Between 1996 and 2000, "the increase in capital gains revenues accounted for a little over 20% of the total increase in federal revenues," former Treasury official Bruce Bartlett said.
For the first time, individual tax receipts hit $1 trillion, before peaking in 2000 from the dot-com bust and Clinton recession.
Despite the government taking in more money from lower taxes on investment income, Obama wants to raise those taxes "for purposes of fairness."
Bush II
While Obama claims the Bush tax cuts caused the recession and record deficits, the evidence says otherwise.
After President George W. Bush in 2003 signed the largest tax cut since Reagan — including dropping the top marginal rate to 35% from 39.6% — government receipts from individual income taxes rose from $794 billion to a peak of $1.2 trillion in 2007, when the mortgage crisis began — a jump of 47%.
Stronger economic growth expanded the tax base and brought in so much revenue that Bush more than halved the deficit over that period.
Revenues weren't the source of the problem. Deficits came from the other side of the ledger: spending, which outstripped new revenues.
And for that, both Democrats and Republicans share the blame.
No comments:
Post a Comment